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What's the Difference Between Government and Conventional Loans?

by 1happygal888 from Hartsburg, Missouri. Apr 13th 2017 Reply


William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,933 contributions

Government loans are FHA, VA and USDA loans..The government does not lend money.. they only insure the loan against default. If you don't pay, then the government will pay a portion of the lenders loss upon foreclosure. Conventional loans are the Fannie Mae/Freddie Mac loans.. these are private sector loans with a "Conforming" set of guidelines which are the same for everyone.. The mortgage insurance on these loans are "Private" which is why they call mortgage insurance on conventional loan's "PMI"... Vs. MI for government loans. In all reality, right now ALL conforming loans are actually government loans since 2008 when the federal government took over both Fannie Mae and Freddie Mac, so they are now referred to as GSA's (government sponsored agencies). I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Apr 13th 2017
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Sara Deere (SARAinMO)
#1 ranked lender in Kansas - 504 contributions

VA and USDA loans in some cases be 100% financing. USDA has income and property qualifications. VA is available to past ad present Veterans. In most cases FHA loans can be done with 3.5 down payment required based on the purchase price. Conventional loans require more down payment money, unless the down payment is 20% of the purchase price. Then the loan can be done with no mortgage insurance built into the loan.

Apr 13th 2017
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Hi happygal, the primary differences are the down payments. Government loans have little to no money down. Please call me at 314-267-5555 HanaThank you!

Apr 13th 2017
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,933 contributions

The differences goes beyond the down payment.. but for reference.. FHA requires 3.5% down payment, and the MI is the same regardless of what your credit score is.. everyone pays the same. Also, FHA charges an upfront premium of 1.75%, which they allow to be financed.. USDA is 100% financing, but also has an upfront premium and a monthly MI premium.. but they are lower than FHA, however, USDA is only available in USDA defined area's.. VA is the best government program, They will do 100% financing also, but you must have VA Benefits available to you to qualify.. There is no MI with VA, but there is an upfront fee.. and it varies depending on whether or not you have use your VA benefits in the past and the type of service you were in.. And if you have a military associated disability, then the VA waives the upfront fee. For conventional, you can go 3% down, but only if you are a first time home buyer.. otherwise, its 5% down. And the PMI varies based on how much you put down and what the credit scores are. I'm a preferred Lender with California and Arizona being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Apr 14th 2017
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