Each type has different requirements for the down payment and credit score and charges different rates and fees.

If you’ve been trying to get a feel for what your monthly mortgage payments would be but aren’t sure which loan would be best for you, we have put together a simple rundown of the six most common types of home loans to help you decide which could be best for you.

Conventional

The most common type of loan you’ll see is called a conventional loan. These have strict lending requirements but come with the perks of lower interest rates and no private mortgage insurance. This type of loan can be used on a primary residence, second home, or investment property.

Credit Score Requirements: You will need to have at least a 620 credit score to be eligible for a conventional mortgage.

Who Is It Best For If you can make a large down payment of at least 20% and have a high credit score, you should consider a conventional loan.

What To Look Out For: If your down payment amount is less than 20%, you will have to pay mortgage insurance.

FHA

The Federal Housing Administration backs FHA loans. They were created in the 1930s to help more people become homeowners and create jobs related to home construction after the great depression.

Today these loans offer flexible lending guidelines and are a popular choice amongst first-time home buyers.

Credit Score Requirements: FHA loans have the lowest credit score requirements out of the six most common loan types. A borrower can qualify with a score as low as 500 if they can put 10% down. With a score of at least 580, they will only have a down payment of 3.5%.

Who Is It Best For?: 83% of FHA borrowers were first-time home buyers. Most FHA borrowers have low credit scores or do not have much money to contribute to a down payment.

What To Look Out For: While FHA loans are great for getting yourself into a house, they may not be the most economical. Every FHA loan will be charged mortgage insurance which can add hundreds of dollars to your monthly mortgage payment. FHA loans also have a maximum loan amount which changes annually. Today, that amount is $420,680 in most parts of Nevada.

VA

VA loans are available to Veterans, Active Duty Members, and some military spouses and are backed by the U.S. Department of Veterans Affairs. The largest benefit of this loan is that the eligible borrower does not have to make a down payment, making home buying significantly more attainable.

Credit Score Requirements: The minimum requirements range from 620 to 660.

Who Is It Best For?: VA loans are only available to active-duty military members or veterans. Proper documentation must be provided before a loan can be approved.

What To Look Out For: The VA charges a funding fee which can be added to your loan. This fee is typically based on a percentage of your loan amount.

USDA

USDA loans are available to properties located in rural areas and are backed by the U.S. Department of Agriculture. There is no down payment required for a USDA loan.

Credit Score Requirements Lenders like to see a credit score of at least 640 to qualify.

Who Is It Best For? USDA loans are intended for lower to moderate-income earners who are looking for property in a rural area. One of the requirements is that the borrower’s adjusted gross income can’t be more than 115% of the median income in the area.

What To Look Out For Not all areas are eligible for this loan, and the loan must be used for a primary residence.

Jumbo Loan

A jumbo loan is used to purchase a luxury home. The government sets no loan limits, and a borrower can get a loan in much larger amounts than they would be able to with any other type of loan.

Credit Score Requirements Jumbo loans have very strict credit requirements. A borrower should have at least a 700 credit score.

Who Is It Best For? Jumbo loans are targeted to borrowers with excellent credit who make over $250,000 per year.

What To Look Out For This type of loan is the most difficult to get, and borrowers must undergo more rigorous credit requirements than those applying for a conventional loan. Approval requires a stellar credit score and a very low debt-to-income ratio.

Adjustable-Rate Mortgage

You may hear these types of loans referred to as “ARMS”, while most mortgages will have the same interest rate for the life of the loan, and adjustable-rate mortgage’s interest rate changes based on market conditions. This means your payment can either go up or down when the rate is reset.

Credit Score Requirements Most lenders will allow a credit score of at least 620.

Who Is It Best For? An ARM can be a smart financial choice for homebuyers who are planning to keep the loan for a limited period of time and can afford any potential increases in their interest rate.

What To Look Out For If your payment is already looking like it is at the top of your budget, an ARM is not a good idea since the payment will increase if rates go up.

If you would like more information about getting a home loan, we can get you in touch with a trusted local licensed mortgage lender who will walk you through the process. Once you have your mortgage-related questions sorted out, we can help you find your new home.

Give us a call to get the process started!