Explained: FHA, VA, USDA, and Conventional Loans

If you’re planning to buy a home in Connecticut, one of the most important decisions you’ll make is choosing the right type of mortgage. With so many options available—FHA loans, VA loans, USDA loans, and conventional loans—it can feel overwhelming to know which is best for your financial situation.

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Each loan type comes with its own benefits, requirements, and ideal borrower profile. This guide from AFC Mortgage Group will break down the key differences so you can make an informed decision with confidence.

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FHA Loans

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FHA loans are backed by the Federal Housing Administration and designed to help first-time buyers and those with moderate incomes or lower credit scores achieve homeownership.

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Key Features:

• Minimum down payment: 3.5% (with a credit score of 580 or higher)
• Flexible credit requirements—ideal for buyers with limited credit history
• Fixed and adjustable-rate options available

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Pros:

• Easier qualification than most conventional loans
• Lower down payment requirements
• Allows for higher debt-to-income (DTI) ratios

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Cons:

• Requires upfront and annual mortgage insurance premiums (MIP)
• Loan limits vary by county
• Not ideal for luxury or higher-priced properties

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Best For: First-time buyers or those rebuilding credit who want a more accessible path to homeownership.

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VA Loans

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VA loans are available to eligible U.S. military service members, veterans, and certain surviving spouses. These loans are backed by the U.S. Department of Veterans Affairs and are among the most borrower-friendly options available.

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Key Features:

• 0% down payment required
• No private mortgage insurance (PMI)
• Competitive interest rates
• Flexible credit standards

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Pros:

• No down payment or PMI saves thousands upfront
• Easier qualification standards than conventional loans
• Reusable benefit—you can use a VA loan more than once

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Cons:

• Must meet military service requirements
• VA funding fee (can be financed into the loan)
• Limited to primary residences only

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Best For: Active-duty military, veterans, and eligible spouses who want to take advantage of a no-down-payment option and lower monthly costs.

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USDA Loans

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USDA loans are backed by the U.S. Department of Agriculture and are designed to encourage homeownership in rural and certain suburban areas. Despite the name, you don’t need to buy farmland to qualify.

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Key Features:

• 0% down payment for eligible buyers
• Lower interest rates than many other loan types
• Income limits apply based on area and household size

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Pros:

• No down payment required
• Lower mortgage insurance costs than FHA loans
• Ideal for moderate-income borrowers

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Cons:

• Property must be in a designated USDA-eligible area
• Income restrictions apply
• Slower approval times compared to conventional loans

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Best For: Buyers who want to purchase a home in rural or semi-rural Connecticut areas and meet income eligibility requirements.

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Conventional Loans

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Conventional loans are not backed by a government agency, but they remain the most common type of mortgage for CT home buyers. They can be used for primary residences, vacation homes, or investment properties.

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Key Features:

• Minimum down payment: 3% for qualified first-time buyers
• Private mortgage insurance (PMI) required for down payments under 20%
• Higher credit score requirements—typically 620 or above

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Pros:

• More property flexibility (can be used for second homes and investments)
• PMI can be removed once you reach 20% equity
• Competitive interest rates for well-qualified borrowers

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Cons:

• Stricter credit and income standards
• Higher down payments for some borrowers
• May not be ideal for those with lower scores or limited savings

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Best For: Buyers with good credit and stable income who want flexibility and long-term cost savings.

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Closing

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Choosing between FHA loans, VA loans, USDA loans, and conventional loans comes down to your financial situation, credit score, and long-term goals. There’s no one-size-fits-all answer—but with expert guidance, you can find the mortgage that fits your needs perfectly. You might also be interested in our blog on Fixed-Rate vs. Adjustable-Rate Mortgages.

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At AFC Mortgage Group, we specialize in helping Connecticut buyers understand their loan options and secure the best possible financing for their home. Whether you’re a first-time buyer or looking to upgrade, we’ll help you compare programs and find the one that works best for you.

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Ready to explore your loan options? Contact AFC Mortgage Group today to learn more about FHA, VA, USDA, and conventional loans and find out which program is right for you.

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