By Mark Kennan
Conventional, Federal Housing Administration and Veterans' Affairs loans are three types of mortgage loans used to purchase homes.Only veterans who meet specific service requirements are eligible for a VA loan. Anyone is eligible to apply for an FHA or conventional loan.
FHA loans and VA loans are backed to a certain amount by the Federal Housing Administration and the Department of Veterans Affairs. This helps banks lend with more confidence because the loans are guaranteed by a third party, unlike conventional mortgages.
VA loans do not require any down payment. FHA loans can have a down payment as low as 3.5 percent. Conventional loans prefer a down payment of 20 percent or more but can go as low as 5 percent.
To get a conventional mortgage, you must have a good credit score. For VA and FHA loans, the requirements are lower because of the federal government guarantee on the loans.
VA loans carry a fee to fund the VA loan program that range from 0.5 to 3.3 percent of the loan. FHA loans are charged an up-front mortgage insurance premium of up to 3 percent (2.75 percent for first-time home buyers). Conventional mortgages may charge for private mortgage insurance if you do not pay at least 20 percent as a down payment.
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