Whats the Difference between FHA, Conventional, and VA financing???

What’s the difference between FHA, Conventional, and VA financing? What do I need to do to qualify for them?

Hey everyone uh so caleb fisk here with river meadow real estate and i’ve got darren glatt here with wright start mortgage um he is one of our favorite lenders to work with um he’s always just had excellent customer service which is one of the best things that we look for with any of our clients we want we don’t want to refer anybody that we would not want to

Use ourselves and everything so so we got darren here to answer a couple questions for us first off i just want to kind of talk about some when people say conventional financing to secure property usually we’re thinking about three different types of financing we’ve got fha conventional and then a va financing so can you tell us a little bit more about what is

A fha and the differences between the different financing stuff like that sure absolutely so generally speaking fha is going to have the lowest threshold in terms of qualifying so credit score requirements going to be a lot less 580 is the minimum we’re looking at three and a half percent down for the down payment and then also in terms of the debt to income

Threshold that we’re able to go up to to help you qualify for the home is going to be a little higher than your than you’ll see on a conventional loan um that loan is government insured so uh there is mortgage insurance that you pay on the the payment itself to ensure that if you were to default on the payment that we would get our money back when we yeah yeah

So it’s uh it’s a great product it’s a foot in the door to purchase a home um yeah i mean it’s a it’s a great product yeah so for the mortgage insurance i know even unconventional if you have less than a 20 equity they still require mortgage insurance but for fha the mortgage insurance goes for the life of the loan or is it 20 yeah so typically with uh fha loan

You’re gonna you’re gonna see mortgage insurance for the life of the loan unless you were to refinance it used to be in in the past where it would fall off eventually but um if if you are buying fha you would have to refinance to remove that that private mortgage insurance yeah and then you said that there’s a difference of the debt to income ratios for fha versus

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Conventional what is the difference there so first off debt to income is your total debts divided by your gross income uh the main difference on fha is we can go up to generally and depending on your credit score up to 55 of your of your gross income uh on conventional financing 50 is the maximum threshold so there’s a little bit more wiggle room in terms of of

Qualifying yeah so conventional is a little bit stricter right yes it is stricter a little a little bit higher of a of a credit score requirement and yeah yes awesome so that was fha um and then uh conventional yeah so conventional they do have as little as three percent down um however standard conventional financing is five percent down payment um and then as i

Mentioned before we can go up to 50 of your of your gross income in terms of the maximum payment that we can allow you minus your your total liabilities so then why would someone want to choose a conventional loan over an fha loan so typically on uh so the main difference really is the mortgage insurance so with fha as i mentioned the mortgage insurance is going

To remain on the loan for the life of the loan until you were to refinance uh once you owe 80 or less of the value of the property at which point you can refinance and get that removed uh with conventional financing however even with as little as five percent down even though you are paying the mortgage insurance in the meantime once you do get to the point where

You owe eighty percent or less of the value of your property that’s actually going to be automatically taken out of your payment right so that’s that’s one of the big differences in fha as opposed to conventional aside from that sometimes there’s going to be a little bit better of an interest rate on on fha however when submitting offers on properties a lot

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Of the time listing agents especially look at conventional as being a more favorable option yeah when kind of discussing the different uh offers that they’re receiving with with their seller only because in their mind they’re kind of thinking that a conventional buyer is a little more qualified yeah just because it’s got a little bit more uh a little slight it’s

Not even that much but slightly stricter criteria you need to have a better debt to income you need to have a better credit score etc right so exactly and so sometimes that’s the case sometimes you know sometimes it could be a very qualified buyer using fha sometimes it could be a conventional loan that’s just squeaking through anyway so correct yeah yeah exactly

So i think each kind of situation is pretty unique whatever your situation is as a buyer that’s going to differ a lot so probably reach out to your lender specifically to see your situation see what’s going to work best for you and then the third conventional form of financing would be the va loan right uh yes so va is 100 financing of course and this is for uh

Veterans of the military um and so what we do for that is we get what’s called a certificate of eligibility from the veteran affairs and if you are eligible for this specific type of financing it is a hundred percent um financing so zero dollars down payment however with va there is what’s called a funding fee and typically it’s 2.3 percent of the loan amount

And so that can either be financed or paid at closing as a one-time cost uh however with va and 100 financing this is going to be a better option than let’s say doing a conventional loan with a down payment program because typically the va is going to have better interest rate okay then the down payment assistance program yeah and then in the escrow process

Another thing like we were talking about with fha and conventional realtors kind of favor one or the other va sometimes isn’t always as favorable but that’s you know again it’s a little bit more subjective but what are a couple of the extra steps in a va loan right so on va in particular they do require a cleared termite report and the appraiser is going to be

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Looking for more health and safety issues with the property um so a lot of the time most properties qualify for va financing uh it’s very rare that we run into a situation where they don’t um but that kind of uh you know i guess you would say deters the the listing agent from wanting to sure except the va fda offers and same thing for fha as well they have

Certain requirements refund as far as your property can’t be falling down and you know being held up by toothpicks yeah yeah these are government insured loans so of course like anything the government is always uh very uh specific and um what they’re looking for in order to insure the loan but that doesn’t mean that a conventional lender is just going to let

Anything fly either i mean they still have some lender required repairs maybe not as strict but they’re still again you can’t have a property that’s about to fall down and they’re just going to finance all of it it has to be livable yeah yeah exactly so running water gas yeah yes no i had a guy once he had a koi pond in his backyard that he was waiting still on

The materials to come to complete the koi pond and the appraiser went out to the property and when we got the report back is required that he filled the koi pond back up with dirt so it’s just a hazard being back there exposed wiring in the backyard um california requires if you have a water heater that we have two straps on the water heater so certain things like

That that they’re looking for yeah so it’s not like it’s the wild wild west with conventional loans and it’s also not like it’s you can’t do anything with fha it’s just slight differences right just uh minor differences yeah so awesome so yeah three forms of conventional financing and then we’ll talk about some other um some other types of financing that don’t

Fit into those conventional ones in the next video you

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What's the Difference between FHA, Conventional, and VA financing??? By River Meadow Real Estate