Home Loan Information
Welcome to the Home Loan Information page of Best Path Solutions. Here, you will find valuable information about different types of home loans to help you make informed decisions. Whether you are a first-time homebuyer or if you have previously owned, our credit and financial counseling services can assist you in finding the best home loan option tailored to your needs.
Types of Home Loans
When it comes to home loans, there are various options available to suit different financial situations. Conventional loans, FHA loans, VA loans, and USDA loans are some of the common choices. Each type of loan has its own requirements and benefits, so it's essential to understand the differences to choose the right one for you.
Ready to explore your home loan options?
Contact Best Path Solutions today for expert credit and financial counseling to guide you through the process and find the best home loan solution for your needs.
CONVENTIONAL HOME LOANS
How a Conventional Mortgage Works
Conventional loans are originated, backed and serviced by private mortgage lenders like banks, credit unions and other financial institutions.
Conventional loans are broken down into conforming and nonconforming loans, depending on whether or not they conform to guidelines set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the two government-backed mortgage companies that own many mortgages in the U.S.
Here are some general characteristics to know:
- Credit score requirement: It's possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.
- Down payment requirement: You can find conventional mortgage loans with a down payment requirement as low as 3%, and some lenders have special programs that offer up to 100% financing. However, if you don't put down 20% or more, the lender typically requires you to pay private mortgage insurance.
- Loan amounts: Conforming conventional loans go as high as $647,200 for single-family homes in 2022 ($970,800 if you live in a designated high-cost area). If you want a bigger loan than that, you'll need a jumbo loan.
- Loan terms: Conventional loans are typically repaid over a 30-year term, but it's possible to qualify for a 15- or 20-year conventional mortgage loan.
- Interest rates: You can get a fixed-rate loan or an adjustable-rate loan. Your interest rate will largely depend on your credit score and overall credit history. The better your credit is, the less you'll pay in interest over the life of the loan.
FHA HOME LOAN
FHA loans allow home buyers to borrow up to a certain percentage of a home’s value, depending on their credit score. Home buyers with a credit score at or above 580 can borrow up to 96.5% of a home’s value. While borrowers with credit scores of 500 – 579 may still qualify for an FHA loan with a 10% down payment, many lenders have their own minimum credit score requirements. Rocket Mortgage® requires a minimum credit score of 580 for FHA loans.
While FHA loans are available with low down payment options and a lower minimum credit score than most other types of home loans, you’ll have to pay a mortgage insurance premium.
USDA RURAL DEVELOPMENT 502 GUARANTEED HOME LOAN
What does this program do?
The Section 502 Guaranteed Loan Program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers – so no money down for those who qualify!
Who may apply for this program?
Applicants must:
- Meet income-eligibility (cannot exceed 115% of median household income)
- Agree to personally occupy the dwelling as their primary residence
- Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien
What is an eligible rural area?
Utilizing this USDA's Eligibility Site you can enter a specific address for determination or just search the map to review general eligible areas.
Why does Rural Development do this?
This program helps lenders work with low- and moderate-income households living in rural areas to make homeownership a reality. Providing affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.
USDA RURAL DEVELOPMENT 502 DIRECT HOME LOAN
FOR LOW AND VERY LOW INCOME APPLICANTS/ PROVIDES A MONTHY SUBSIDY TO QUALIFIED APPLICANTS:
What does this program do?
Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants obtain decent, safe
and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment
assistance is a type of subsidy that reduces the mortgage payment for a short time.
The amount of assistance is determined by the adjusted family income.
Who may apply for this program?
A number of factors are considered when determining an applicant’s eligibility for Single Family Direct Home Loans. At a minimum,
applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit
for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.
Effective January 1, 2025, the current interest rate for Single Family Housing Direct home loans is 4.50% for low-income and very low-income borrowers.
- Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
- Interest rate when modified by payment assistance, can be as low as 1%
- Up to 33 year payback period - 38 year payback period for very low income applicants who can’t afford the 33 year loan term