(NewsNation) — Those considering a mortgage often have several options to choose from.

Which mortgage to choose can be confusing given FHA, USDA and VA loans are often available to prospective homebuyers.

What are USDA loans?

USDA loans can be a great way to unlock homeownership for qualified borrowers.

• U.S. Department of Agriculture (USDA or rural development) loans can be acquired without a down payment.
• USDA loans are largely meant for those buying in rural areas of the United States and select areas of the nation. Buyers must meet certain requirements, including purchasing property within specific areas. 
• USDA loans are guaranteed by the USDA Rural Development Guaranteed Housing Loan Program, a part of the U.S. Department of Agriculture.

While it can vary, a 640 credit score is usually sufficient for a USDA loan. As is custom for more rural regions, the USDA loan is suitable for lower-income buyers.

USDA loans don’t require borrowers to pay for traditional private mortgage insurance or PMI. 

According to nerdwallet, there are three USDA home loan programs: loan guarantees, direct loans and home improvement loans and grants.

For loan guarantees, the USDA will guarantee a mortgage provided by a local lender, allowing borrowers to qualify for low interest rates. 

Direct loans and mortgages are issued by the USDA for low-income applicants who are without safe housing or can’t access a traditional home loan.

Home improvement loans and grants permit homeowners to repair or upgrade their homes. Loans are capped at $40,000, while grants have a maximum of $10,000.  The terms of these type of loan are for 20 years with a 1% interest rate.

According to NerdwWallet, if the borrower sells their home within three years of acquiring the loan, they’ll have to repay any grant money.

What are FHA loans?

 Federal Housing Administration (FHA) loans are a government-backed loan that allows you to buy a home with less strict financial requirements.

• FHA loans are regulated and insured by the FHA but offered through private lenders.
• They allow for down payments as low as 3.5% and tend to be more open to borrowers with lower credit scores than most conventional loans.
• For that reason, FHA loans tend to be the most affordable option for people with lower credit scores and a small down payment, although maximum amounts will vary by county.

On the other hand, borrowers with good credit and a 10 to 15% down payment often pay more with an FHA loan than a conventional loan, according to the CFPB.  

FHA loans are backed by the government, but lenders may still have differing requirements and policies. According to NerdwWallet, it’s smart to shop around.

FHA loans, insured by the Federal Housing Association, are often most suited to low-credit or first-time buyers, but there are some things to be mindful of.

Mortgage insurance premiums must be paid monthly and at closing and the loans usually require at least a 500 credit score.

Even though FHA loans don’t require down payments, borrowers may be subjected to an upfront fee and ongoing mortgage insurance premiums to the USDA, according to the CFPB.

What are VA loans?

VA loans are solely available to veterans, service members and surviving spouses and are guaranteed by the Department of Veteran Affairs.

The loans are provided by private lenders and backed by the federal government. They tend to have lower rates than conventional mortgages and don’t require a down payment or private mortgage insurance.

Even though, VA loans do not require, a down payment or credit score, some service-related requirements must be met to qualify.

• Like FHA loans, VA loans are often more expensive for people with good credit and funds for a large down payment.
• They also don’t require monthly mortgage insurance premiums, but they tend to mandate an upfront fee at closing, according to the CFPB.

Government data shows the total number of VA-backed purchase loans fell by more than 20% last fiscal year — a sign that rising mortgage rates hit veterans hard despite their access to better loan terms.

Standardized mortgages

Fixed-rate or conventional mortgages generally require higher credit scores and are most suitable for those with good credit.

• With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan, as do the borrower’s monthly payments toward the mortgage.
• Downpayments can be as low as 3%, and a credit score of at least 600 is usually needed, though it can vary depending on the institution.

Fixed-rate or conventional mortgages are best for borrowers who would prefer a set monthly payment for the duration of the loan.

Adjustable-rate mortgages are also a type of conventional mortgage and are best for borrowers who aren’t planning to stay in the home for an extended period, according to NerdwWallet.

Adjustable-rate mortgages feature lower payments in the short term for a buyer comfortable with the possibility of having to pay more in the future.