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Also known as renovation loans, there are several types of rehab loans that give homeowners and home buyers the ability to finance both the purchase or refinance of their home along with funds needed to renovate the home through a single loan. The most common rehab program is the FHA 203(K) program.
Typically, a minimum down payment of 20% is required if you're purchasing a property to rent out. Because of the inherent risks in financing a property that is not your primary residence, interest rates are almost always higher than if you were purchasing the property as your primary home.
A reverse mortgage is for older homeowners that are at least 62 years old and own their homes outright or have a low balance compared to the value of the home. This type of loan requires no monthly mortgage payments and in fact, pays a monthly amount to the homeowner, which is drawn from the home's built up equity. However, borrowers are still responsible for paying their property taxes and homeowner's insurance. Reverse mortgages allow eligible homeowners to access their equity and defer payments until they pass away or sell their home. The unpaid interest gets added to the balance of the loan. This may be a great option for seniors who need to supplement existing income.
FHA loans are insured by the Federal Housing Administration and are open to all applicants that qualify. These loans are insured by the government through mortgage insurance premiums (MIP) paid by the borrower. MIP typically consists of a portion paid up front as well as a monthly payment. Like conforming loans, the maximum loan amount is set at the county level and borrowers can purchase homes with as little as 3.5% down and less than perfect credit.
Conventional loans are home loans that are not backed by the government such as the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA).
Like FHA loans, VA loans are insured by the government through the Department of Veterans Affairs (VA). VA loans are for veterans who meet the minimum number of days of completed service. Unlike FHA loans, there is no MIP and eligible borrowers can purchase their home with no money down. However, borrowers do pay a VA funding fee which can be financed through the loan and is paid directly to the Dept. of Veterans Affiairs