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It may be intimidating looking at all these different kinds of loans that are out there, and to know which one might be right for you. Everyone has very different needs when it comes to mortgages, so it is important to know what you need to determine which loan will suit you best.

If you are purchasing a new home, it is important to know what options you have. You can choose from a few different types of loans, including: Conventional Mortgage, FHA, VA, and USDA. Lets go over each to see what will work best for you:

Conventional: A conventional mortgage is the most popular type of mortgage. These mortgages are available from most lenders in the nation. These can be used to finance your primary residence, or even a second/investment property. Depending on the lender, these can require as little as 3% of a down payment. One thing to consider with a conventional loan is that if you do not have 20% equity in your home, you will be required to pay what is called PMI (private mortgage insurance) which will increase your payment a bit. Once you have 20% ownership in the home, the PMI portion of your payment will be removed. You will typically need a 620+ credit score to secure a conventional loan on your home.

FHA: An FHA loan is insured by the Federal Housing Administration and are often used for buyers that are looking for a lower down payment, or for someone that may have a lower credit score. FHA loans can be secured with as low as a 500 credit score in some cases. FHA loans typically have competitive interest rates for buyers as well. One down side with an FHA loan is that you have a PMI (private mortgage insurance) portion of your payments as well, but this portion is never removed as long as you are on an FHA loan. This is in essence a security payment that you are paying because your loan is backed by the government and is a little easier to secure the loan.

VA: A VA loan is guaranteed by the U.S. Department of Veteran Affairs, designated for members, active or retired, of the U.S. military, as well as surviving spouses. VA loans have very competitive interest rates, with no down payment, mortgage insurance, or credit score requirements. These are very good loans for many veterans in the nation, and are typically very easy to refinance when there is a benefit to do so. One drawback on these loans is there can sometimes be a VA funding fee that is often added to the loan balance during the refinance. Check with your loan officer for sure, as many veterans are exempt from this funding fee.

USDA: A USDA loan is guaranteed by the U.S. Department of Agriculture, designated to help moderate to low income borrowers purchase homes in areas that are more rural. These loans, like VA loans, don’t have down payment or credit score requirements. If you are purchasing a home in a USDA eligible area, these loans should be highly considered. The only drawback on these loans is they do charge a guarantee fee, so that is something to consider with your loan officer.

There are other types of loans out there, but these are some of the basic ones to consider. If you are a little more strapped for cash and maybe your credit isn’t the best, FHA or VA loans may suit you well. If you are in a rural area, don’t sleep on a USDA loan. These can have very competitive interest rates when compared to conventional rates. If you have decent credit, and plan to be in your home for a long time, and are not a veteran, a conventional mortgage may be your best bet. Your PMI payment can really affect your monthly bills, so that is something to definitely consider. With house appraisals rising each year, your PMI could be removed on a conventional loan pretty quick, so that is definitely something to watch for.

At the end of the day, there is no wrong answer. Find a loan and rate that works for you, and get chatting with your loan officer. There’s a reason why real estate is one of the best and most consistent investments in a persons’ life. You can’t go wrong.