What Type of Mortgage is Right for You?

FHA, Conventional, and VA mortgages are three different types of home loans, each with its own set of features and eligibility criteria. Here's an overview of each:

  1. FHA (Federal Housing Administration) Mortgage:
  • Purpose: FHA loans are designed to help individuals with lower income or credit scores qualify for a mortgage.
  • Down Payment: One of the key advantages is the lower down payment requirement. Borrowers may be able to qualify with a down payment as low as 3.5% of the home's purchase price.
  • Credit Requirements: FHA loans are more lenient when it comes to credit scores compared to conventional loans. Borrowers with lower credit scores may still qualify.
  • Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (MIP) and an annual premium, which can increase the overall cost of the loan, however, this fee is typically rolled into the loan amount and not cash out of pocket.  Once you've established 20% equity the mortgage insurance can be removed all together.
  • Property Standards: Homes financed with FHA loans must meet certain property standards, and the FHA appraisal process is typically more detailed.  FHA states the home must be safe, secure and livable.
  • Loan Limits: There are limits to the amount you can borrow with an FHA loan, which vary by location.  The FHA loan limit in Clark County is currently $495,000.
  1. Conventional Mortgage:
  • Purpose: Conventional mortgages are not insured or guaranteed by the government. They are ideal for borrowers with good credit and financial stability.
  • Down Payment: Typically, conventional loans require a higher down payment compared to FHA loans. A down payment of at least 5% to 20% is common, but it can vary based on factors like credit score and loan-to-value ratio.
  • Credit Requirements: Conventional loans generally have stricter credit score requirements compared to FHA loans. A higher credit score can result in better interest rates.
  • Mortgage Insurance: If the down payment is less than 20%, private mortgage insurance (PMI) may be required until the borrower builds sufficient equity in the home.  Mortagage insurance is on a sliding scale so, the more you put down, the lower the mortagage insurance.  Once you've reached 20% equity the mortgage insurance can be removed all together. 
  • Loan Limits: Conventional loans may have higher loan limits than FHA loans, and they are not restricted by location.  The current conventional loan limit in Clark County is $726,000.
  1. VA (Veterans Affairs) Mortgage:
  • Purpose: VA loans are available to eligible military veterans, active-duty service members, and certain surviving spouses. The aim is to provide a benefit for those who have served in the U.S. military.
  • Down Payment: One of the significant advantages of VA loans is that they often require no down payment, making homeownership more accessible for eligible veterans.
  • Credit Requirements: VA loans tend to have more flexible credit score requirements compared to conventional loans.
  • Mortgage Insurance: VA loans typically do not require private mortgage insurance, even with zero down payment. However, there is a funding fee, which can be financed as part of the loan.
  • Loan Limits: VA loans may have county-specific loan limits, but they generally offer more flexibility in terms of borrowing amount.  There is no loan limit for VA loans. 

Before deciding on a mortgage type, it's essential to consult with a mortgage professional to assess your specific situation and determine which loan product is the best fit for your needs and financial circumstances. Additionally, loan terms and requirements may change over time, so it's a good idea to stay updated with the latest information from lenders and government agencies.

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