Down Payments for Owner-Occupied Homes

• All four agencies provide financing or insure loans for owner-occupied homes. Each has a different minimum down-payment requirement. Fannie Mae and Freddie Mac require the borrower to put at least 5 percent of the purchase price down on an owner-occupied home to qualify. As of March 2011, FHA only requires a 3.5 percent down payment to purchase a home. VA doesn't require a down payment to purchase a home and is one of the few $0 down payment loans remaining in the mortgage industry.
  
  

Credit Requirements

• FHA provides the easiest credit requirements of the four, closely followed by VA. These two lenders require reasonably good credit but provide financing faster for borrowers with past bankruptcy or foreclosures. Both VA and FHA allow a homebuyer with a Chapter 7 bankruptcy to finance a home after two years --- sometimes less than two years if extenuating circumstances caused the bankruptcy. Freddie Mac and Fannie Mae normally require the borrower to wait four years before obtaining a new loan after bankruptcy.
  
  

Ownership Types

• Neither FHA nor VA allows individual borrowers to purchase vacation homes or investment properties with their loan programs. Borrowers obtaining an FHA or VA loan must occupy the property within 60 days of closing. Fannie Mae and Freddie Mac allow financing for vacation homes and investment properties. These loans usually require a larger down payment and stronger credit profile than an owner-occupied conventional mortgage.
  
  

Unique Features

• VA only offers loans to eligible veterans of the armed forces and their spouses or widows; FHA, Freddie Mac and Fannie Mae lend to anyone, regardless of veteran status. VA charges a funding fee but doesn't charge monthly insurance or a fee for the loan program. FHA charges two types of mortgage insurance: an Upfront Mortgage Insurance Premium, or UFMIP, and a monthly mortgage insurance premium, or MIP. FHA requires borrowers to pay these premiums for the life of the FHA loan. Conventional mortgage lenders require private mortgage insurance, or PMI, on all loans with less than 20 percent equity, but the borrower may remove this coverage when he achieves 20 percent equity in the home.