3% Down Payment: First-time buyers, low- to moderate-income buyers, or buyers in low-income communities may be eligible to purchase with only 3% down payment.
Conventional Loans: These loans are commonly referred to simply as conventional loans although any loan not backed by the government is a conventional loan, but conventional loans typically conform to Fannie or Freddie guidelines.
Down-Payment Assistance Programs: Down-payment assistance programs are often available for eligible buyers. Borrower income limits and sales price limits may apply.
Eligible: There is a household income limit depending on family size and geographic restriction for eligibility for a USDA home loan.
Fannie Mae & Freddie Mac: Fannie Mae, the Federal National Mortgage Association and Freddie Mac, the Federal Home Loan Mortgage Corporation, are publicly traded government-sponsored enterprises (GSEs). They buy mortgage loans originated by lenders, securitize, pool and sell them to investors in the open market as mortgage-backed securities. Fannie Mae and Freddie Mac have a maximum loan amount and a conventional loan with a loan amount exceeding the maximum is a non-conforming conventional loan commonly referred to as a Jumbo loan.
Funding Fee: The one-time Funding Fee is determined by the veteran borrower’s down payment and whether first-time use or subsequent use of the home loan benefit. Most borrowers receiving VA disability are exempt from the Funding Fee.
Gift: Gift funds may be permitted from a family member or other acceptable source(s).
Guaranteed: There is no PMI on a USDA loan but a Guarantee fee paid to USDA. An up-front Guarantee Fee is required and this is typically financed. A monthly fee, typically less than PMI, is included in the monthly house payment.
Insured: The Mortgage Insurance Premium (MIP) is paid via an Up-Front Mortgage Insurance Premium (UFMIP) which may be and is typically financed within the loan itself, and a monthly payment of mortgage insurance which is included in the borrower’s monthly house payment.
PMI: Private Mortgage Insurance is provided by a private mortgage insurance company, not a government agency, and allows buyers to buy without saving for a 20% down payment. PMI may usually be dropped once 20% equity is reached. Government loans typically require their forms of insurance, such as FHA’s Mortgage Insurance Premium, VA’s Funding fee or USDA’s Guarantee fee.