USDA, VA, FHA, and Conventional Loans: Which One is Right for You?

When buying a home, choosing the right loan program is crucial. Each mortgage type—USDA, VA, FHA, and Conventional—offers unique benefits tailored to different buyers' needs. Below, we break down the key differences to help you determine which loan is the best fit for you.

USDA Loans: Ideal for Rural Buyers

• Max Financing: 100% (No down payment required)

• Closing Costs: Can be financed

• One-Time Fee (Financed): Guarantee Fee of 1.0%

• Monthly Fee: 0.35%

• Waiting Periods: Bankruptcy - 3 years, Foreclosure - 3 years, Short Sale - 3 years

• Seller Concessions: Up to 6% of the sales price

Best For: Buyers in rural or suburban areas with moderate to low income who need a zero-down-payment loan.

VA Loans: Best for Veterans and Active Military

• Max Financing: 100% (No down payment required)

• Closing Costs: Cannot be financed

• One-Time Fee (Financed): VA Funding Fee of 0.3% - 3.3%

• Monthly Fee: None

• Waiting Periods: Bankruptcy - 2 years, Foreclosure - 2 years, Short Sale - 2 years

• Seller Concessions: No cap on closing costs, but a 4% cap towards pre-paids and other items

Best For: Eligible veterans, active-duty military members, and some surviving spouses who want a loan with no down payment and no monthly mortgage insurance.

FHA Loans: Great for First-Time Buyers

• Max Financing: 96.5% (3.5% down payment required)

• Closing Costs: Cannot be financed

• One-Time Fee (Financed): Mortgage Insurance Premium (MIP) of 1.75%

• Monthly Fee: 0.55%

• Waiting Periods: Bankruptcy - 2 years, Foreclosure - 3 years, Short Sale - 3 years

• Seller Concessions: Up to 6% of the sales price

Best For: First-time buyers or those with lower credit scores who want a low down payment option with flexible credit requirements.

Conventional Loans: Best for Strong Credit Buyers

• Max Financing: 97% (Primary residence), 90% (Second home), 85% (Investment property)

• Closing Costs: Cannot be financed

• One-Time Fee (Financed): Varies

• Monthly Fee: Varies

• Waiting Periods: Bankruptcy - 4 years, Foreclosure - 7 years, Short Sale - 4 years

• Seller Concessions:

• 3% with <10% down

• 6% with >10% down

• 2% for investment properties

Best For: Buyers with strong credit and higher down payment capability who want to avoid mortgage insurance after reaching 20% equity.

Each loan type serves a unique purpose, and the right choice depends on your financial situation, eligibility, and homeownership goals. Our team would love to connect you with an experienced lender so that you can consult with a mortgage professional to explore your best options, just give us a call!