FHA loans: This is often the loan of last resort. FHA loans have the highest monthly mortgage insurance costs, which borrowers will also pay for the duration of their mortgage. Credit requirements are looser, but borrowers who can work to improve their score and muster an additional 1.5 percent in down payment savings will benefit from pursuing conventional financing.
Weigh Your Options
Deciding which loan is right for you is a conversation that should include a good loan officer. Have them run the hard numbers and give you a clear breakdown of the benefits and disadvantages.
For example, VA loans aren’t automatically the best fit for every eligible veteran. Qualified VA borrowers with excellent credit and enough cash for a 20 percent down payment might get better rates and terms going conventional.
But that rosy profile is more exception than rule for VA-eligible borrowers, which is what makes this program so powerful for service members, veterans and military families.
Here’s the bottom line: Get a clear understanding of your options and the opportunities they present before pushing forward on a home purchase.
Checking your credit before you start looking for a home can help you determine whether you’re ready to buy. Giving yourself plenty of time to build your credit and get a higher credit score can help you qualify for better loan terms, and can save you money over time. Check your credit scores, which you can do using a free tool through Credit.com, to see where you stand. Then check your credit reports for errors that you’ll need to dispute, or problem areas that you need to work on in order to get your credit on track.
This article originally appeared in Credit.com.
Any opinions expressed in this column are solely those of the author.