See the chart below for loan comparisons

  • Conforming
  • FHA
  • Rural Housing
  • VA

Loan Programs

Conforming Loans

Conforming loan products are those loans that are purchased by Fannie Mae and Freddie Mac providing funds for mortgage lenders to continue to provide mortgage loans to consumers. Fannie Mae, Freddie Mac and the mortgage insurance companies that insure these loans have tightened the approval process and increased the amount of funds that are required from borrowers to achieve home ownership. The minimum down payment for any of these loan programs in currently 3% and must be from the borrowers own funds. In addition to the stricter requirements, they have also declared certain areas as declining market areas and have further increased the required down payment in those areas.

Most approvals for conforming loan programs are determined by an automated underwriting system. Some lenders will perform manual underwrites where an underwriter will look at the file based on a "make sense criteria".

Depending on the borrowers scenerio and overall profile, conforming loans may still be the best loan program for your situation. Your mortgage specialist will determine the best overall product for your situation.

FHA Loans

FHA has come back in popularity in today's mortgage market because of the changes that have happened with the conforming loan programs. Although FHA does require the borrower to have 3% of their own funds into the transaction, they can satisfy this by receiving a gift from a qualified down payment sources.

It is important to know that FHA is not a lender. FHA is a government agency the insures FHA loans through up front mortgage insurance and monthly mortgage insurance that is paid by the borrower. The up front mortgage insurance is added on to the top of the loan and is financed by the lender. The monthly mortgage insurance tends to be much less than the mortgage insurance on conforming loans because of the up front mortgage insurance, making the monthly payment more affordable. FHA has it's own underwriting guidelines, called the "FHA Total Scorecard".

Approvals can be determined by an automated underwriting system or a manual underwrite based on a "make sense criteria" of underwriting.

Rural Housing

USDA Rural Houisng is a government agency that will provide 100% financing with no monthly mortgage insurance for lower income borrowers in rural areas. Typically this excludes counties that are considered metro areas, although some parts of these counties may be eligible. Rural Housing also has an income restriction depending on the location.

Rural Housing has an up front mortgage insurance that can be rolled in to the loan amount.

Rural Housing is also one of the few loan programs that allow you to base the loan to value on the appraised value if it is higher than the purchase price. This allows borrowers to roll closing costs into the loan amount if the property appraises high enough and the seller is not willing to contribute the closing costs.

It is also one of the few programs that allows the borrowers to finance certain repairs and upgrades to the home based on the future value after those repairs.

Approvals are only determined by a manual underwrite on a "make sense criteria".

VA Loans

VA loans will continue to grow in popularity as veterans return back from the war. VA offers 100% financing with no monthly mortgage insurance. To qualify for a VA loan you must be a veteran or a widow/widower of a veteran and remarried. Overall benefits to veterans are determined by the veterans benefit awards letter. Additional benefits are available for disabled veterans.

VA loans have an up front mortgage insurance that is financed into the loan. The amount of the up front mortgage insurance depends on if you have used a VA loan in the past.

Approvals are determined by an automated underwriting system.

Reverse Mortgage

See our Reverse Mortgage site for information on reverse mortgages

Loan Comparison Chart

Below is a chart that shows a comparison of these loan programs. Other programs may be available and you should contact a mortgage specialist to determine the best loan program for your scenerio.

Conforming FHA Rural Housing VA
3% Minimum Down 3% Minimum Down(1) 0% Down 0% Down
Borrower must have down payment from own funds Gift funds count towards minimum down No minimum down No minimum down
Higher monthly Mortgage Insurance Low monthly Mortgage Insurance No monthly Mortgage Insurance No monthly Mortgage Insurance
No Upfront Mortgage Insurance Upfront Mortgage Insurance ranges from 1.75% - 2.25% Upfront Mortgage Insurance 2.00% Upfront Mortgage Insurance 2.15% (first time use) 3.30% (subsequent use)
Seller can contribute up to 3% of closing costs(2) Seller can contribute up to 6% of closing costs Seller can contribute up to 6% of closing costs No limit to seller contributions.
Most programs have no restricted property areas No restricted property areas Restricted to Rural Housing areas(3) No restricted property areas
Most programs have no income restictions No income restrictions Income restrictions based on county(4) Must be a Veteran or unmarried widow/widower of a veteran
Declining market areas may require more down No declining market areas No declining market areas No declining market areas
  • FHA down payment ranges from 1.25% - 2.85% depending on the state and loan size. FHA requires the borrower to have a total of 3% of their own funds between the down payment and closing costs.
  • Conforming loan programs will allow a higher contribution from the seller for larger downpyaments.
  • To find out if your area qualifies for Rural Housing contact a mortgage specialist.
  • To find out if your income qualifies for Rural Housing contact a mortgage specialist.