Conventional loans require 3-20% down payment, 620+ credit score, and PMI below 20% down (removable at 80% LTV). FHA loans require 3.5% down with 580+ credit, lower standards but permanent MIP in most cases. VA loans require zero down payment, no PMI, available only to eligible veterans/military with a funding fee. USDA loans offer zero down payment for rural properties with income limits. Each loan type has different maximum loan limits and property requirements.
A first-time buyer with a 650 credit score, limited savings, and no military service would likely use an FHA loan (3.5% down, lower credit threshold). A veteran would benefit most from a VA loan (zero down, no PMI). A buyer with 20% down and strong credit would choose conventional (no PMI, most flexibility).
Create a comparison chart: Conventional (3-20% down, PMI if <20%, removable), FHA (3.5% down, MIP for life), VA (0% down, no PMI, funding fee, veterans only), USDA (0% down, rural only, income limits). The exam frequently asks which loan is best for a specific borrower scenario.
Related Terms
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Frequently Asked Questions
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