Finding the right loan

The Consumer FinanceProtection Bureau offersa breakdown of thedifferent types of loans available and the pros and cons of each. Talk to your lender to see which loan is best for you.

CONVENTIONAL LOANS

Conventional loans are just what their name suggests – a typical loan made through a lender with no additional programs. These loans usually require a 20 percent down payment or for the borrower to pay mortgage insurance. The government sets maximum loan amounts for conventional, or conforming, loans.

FHA LOANS

Federal Housing Administration loans are from private lenders but are regulated and insured by the FHA. These loans allow down payments as low as 3.5 percent and don't require borrowers to have as high a credit score as conventional loans. This loan is best for borrowers with lower credit scores or who have less than 10 percent of the loan to make as a down payment.

VA HOME LOANS

The Veterans Affairs Administration offers low-interest home loans to current and former military members and eligible surviving spouses. These are through private banks and mortgage companies, but the VA guarantees a portion of the loan, which means better terms for the borrower. According to the VA, these do not require a down payment or charge mortgage insurance.

USDA LOAN PROGRAMS

The U.S. Department of Agriculture offers a loan program for low to moderateincome potential homeowners who want to buy or build in a rural area. According to USDA, the Single Family Housing Direct Loan does not require a down payment and offers a lower mortgage insurance rate. Check with a local lender to determine what areas in your region qualify as rural.

DOWN PAYMENT ASSISTANCE PROGRAMS

Look into what your local government or nonprofits are offering. Some cities and counties offer help to employees who are relocating or for public service employees like teachers or firefighters. These loans often have a higher interest rate than a conventional loan or may require you to repay a prorated portion of the assistance if you move before a certain time. Ask a local lender for what resources are available.

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