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The differences between FHA, VA, and USDA mortgages

When you get a mortgage, there are several options you can choose from, including FHA, VA, USDA, and conventional mortgages. And the one you pick? That will determine how big a down payment you’ll need, what credit score you should have and all the other requirements you’ll need to meet, too.

But choosing the right mortgage product can be difficult — especially if you’ve never bought a home before.

Are you confused about your mortgage options? Just need help deciding which program is the best fit for your upcoming home purchase? Here are your choices:

FHA mortgages

FHA mortgages are insured by the Federal Housing Administration. They allow for lower credit scores than most other loans. In fact, with some lenders, you may be able to get approved with a credit score as low as 500 (as long as you make at least a 10% down payment).

The one caveat with FHA loans is that they require a Mortgage Insurance Premium both at closing and as part of your monthly payment. The exact cost of this varies based on your loan balance and down payment.

Minimum down payment: 3.5%

Minimum credit score: 500 to 580, depending on down payment size

Who they’re best for: First-time homebuyers, low-credit score buyers

VA loans

VA loans are mortgage loans that are guaranteed by the Department of Veterans Affairs. Only homebuyers who are military veterans, current military members or their spouses can qualify for a VA loan. Applicants also need to meet certain service requirements, as well as obtain a Certificate of Eligibility from the VA.

VA loans come with some of the lowest interest rates around, and there are also no minimum credit score or down payment requirements.

Minimum down payment: Zero

Minimum credit score: None

Who they’re best for: Veterans, military members, spouses of veterans and military members

USDA loans

USDA loans are mortgages backed by the U.S. Department of Agriculture. They’re reserved for buyers in more rural parts of the country, and they’re only available in certain areas. Borrowers also need to fall under the set income threshold for their community. Like VA loans, USDA loans require no down payment.

Minimum down payment: Zero

Minimum credit score: Typically 640, though it varies by lender

Who they’re best for: Rural homebuyers, low-income buyers, buyers who have no down payment savings

Conventional mortgages

Conventional mortgages are loans issued without any government insurance or backing, like those mentioned above have. Because of this, lenders tend to be more strict about which borrowers they’ll approve for these loans.

Typically, conventional mortgages require higher credit scores than other mortgage options, though it varies by lender. The minimum down payment is just 3%, but if you go that low — or make any down payment under 20% — you’ll usually have to pay for Private Mortgage Insurance. Unlike the mortgage insurance on FHA loans, PMI is cancellable after you’ve paid off enough of your loan.

Minimum down payment: 3%

Minimum credit score: Typically 620, though it varies by lender

Who they’re best for: Buyers with good credit

Which will you choose, an FHA, VA, USDA, or conventional mortgage?

If you’re still not sure whether an FHA, VA, USDA, or conventional mortgage is the best fit for your home purchase, talk to a loan officer or mortgage broker in your area. They can help point you toward the best option for your budget and goals.

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