Loan Types:

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• A private mortgage is a financial arrangement between a borrower and a private, individual lender in which the lender provides financing to the borrower to purchase a home. Lenders often offer private mortgages to family, friends or others with personal relationships and generate investment profits from the interest. Some may consider this option because they may not qualify for a mortgage with a traditional lender or may wish to avoid some red tape during the buying process. The loan itself works like a regular mortgage – you must pay back the loan, plus interest, within a certain, agreed-upon time. The lender has a lien on your property, which can be foreclosed if you default on the loan. No PMI required.

• A conventional mortgage loan is a “conforming” loan, which simply means that it meets the requirements for Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase mortgages from lenders and sell them to investors. This frees up lenders’ funds so they can get more qualified buyers into homes.

• Because there are several different sets of guidelines that fall under the umbrella of “conventional loans,” there’s no single set of requirements for borrowers. However, in general, conventional loans have stricter credit requirements than government-backed loans like FHA, VA, or USDA loans.

• Down Payments as low as 3% but usually 5% is the more realistic percent, but either way you will need PMI or Private Mortgage Insurance. Any time time you buy a property with less than 20% down you will be required to get PMI. If what you are buying is a second home you will need 15%-20% down.
• PMI cost will be determined by loan type, credit score and size of your down payment.
• Credit Score Requirements - 620 or better to qualify.
• Debt-to-Income ratio: or DTI is a percentage, that represents how much of your monthly income go to pay off your debt. Most conventional loans DTI must be 50% or lower.

FHA Loans -  

• FHA loans, which are backed by the Federal Housing Administration.  BASIC HOME MORTGAGE LOAN 203(B)
• What is the purpose of this program?
• To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.
• What are the eligibility requirements?
• The borrower must meet standard FHA credit qualifications.
• The borrower is eligible for approximately 96.5% financing. The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
• Eligible properties are one-to-four unit structures.

VA Loans - 

• Are loans that benefit those that have military service, only available to veterans, active-duty servicemembers and their surviving spouses. 

USDA Loans -  

• Can only be used to purchase properties in qualifying rural areas. Those who qualify for a USDA loan may find that it’s a very affordable loan compared to other loan options.  
• USDA loans have income limits that vary based on the city and state where you’re buying the home. When evaluating your eligibility for a USDA loan, your lender will consider the incomes of everyone in the household – not just the people on the loan.

• Credit scores above 580 only require a minimum down payment of 3.5%. 
• If you put less than 10% down on an FHA loan, you’ll have to pay a mortgage insurance premium for the life of the loan.
• Can be approved with a credit score as low as 500 with a 10% minimum down.

• No down payment.
• Better terms and interest rates. 
• No need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP).
• The ability to borrow up to the Fannie Mae/Freddie Mac conforming loan limit.
• You can’t use a VA loan to buy a second home.  
• The funding fee ranges from 1.25% to 3.3% of the loan amount and varies based on your down payment, and whether you are buying a home or financing it, and how many times you have used your VA loan benefits.
• Fewer closing costs.

• USDA loans don’t require borrowers to pay private mortgage insurance (PMI), but they do require borrowers to pay a guarantee fee, which is similar to PMI.
• If you pay it upfront, the fee is 1% of the total loan amount. 
• You also have the option to pay the guarantee fee as part of your monthly payment. 
• The guarantee fee is usually more affordable than PMI.