Conventional, FHA, VA, jumbo: what each one is really for

Conventional loans follow guidelines set by the agencies that buy them. They generally want stronger credit and allow the borrower to avoid mortgage insurance at a sufficient down payment, and the insurance can be cancelled later. They are the default for a borrower with a clean file. FHA loans are insured by the federal government and are built for borrowers with thinner credit or a smaller down payment. The trade is mortgage insurance, including an upfront premium, and on many recent loans the annual premium runs for the life of the loan. They also impose property condition standards that can complicate a fixer. VA loans are available to eligible service members, veterans and certain surviving spouses. No down payment is required in the ordinary case and there is no monthly mortgage insurance, with a funding fee instead that some borrowers are exempt from. For an eligible borrower it is usually the strongest option available and it is routinely overlooked. Jumbo loans exceed the conforming limit for the county. They are held on the lender's books or sold privately, which means the underwriting is the lender's own: more reserves, more documentation, and meaningful variation between lenders on the same file. USDA loans cover eligible rural areas with income limits, and parts of Florida qualify that people assume would not. The practical step is to get the file underwritten before shopping for a property. A pre-approval that has been through underwriting is a different instrument from a pre-qualification letter generated in four minutes. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com