Dear 100 Hour Board (especially Sunday Night Banter),
What is the difference between FHA, USDA, and traditional loans when buying a house? I kind of understand the positives of the USDA and FHA loans, but nothing I've seen has listed any kind of negative aspects to them, is there any reason that a qualifying person wouldn't want to use one of these programs?
-My Name Here
This is a fantastic question! In order to give you a side-by-side comparison I created the following chart:
|Different Loan Types|
|+||Lower credit scores are accepted||+||No strict limits for credit eligibility or debt-to-income ratio||+||Usually offers best interest rate||+||No down payment required|
|+||Requires a smaller down payment compared to conventional loans||-||Have to be cleared by the VA||+||Usually no Private Mortgage Insurance||-||Limited to certain geographical areas|
|-||Usually requires you to pay Private Mortgage Insurance (PMI)||-||Can usually get better rate with conventional loan||-||Requires higher down payment||-||Borrower can't have income 115% above median income for area|
|-||Usually requires you to pay higher closing costs||-||Usually requires a VA funding fee||-||Home has to meet USDA standards|
|-||Home needs to meet FHA standard of living||-||Usually requires Private Mortgage Insurance|
To be honest, each person will need to choose a loan type based off of their individual situation. I would recommend discussing your options with an Equal Housing lender because they will be able to give you specific direction based off your financial circumstance.
If you need a recommendation for a lender to talk to, I'd be happy to offer some options. Just shoot me an email and we'll talk.
-Sunday Night Banter