Which loan type would buyers with limited closing funds most likely consider?

The FHA loan is particularly favorable for buyers with limited closing funds because it is designed to promote homeownership among low-to-moderate-income individuals and families. One of the standout features of FHA loans is their lower down payment requirement, which can be as little as 3.5% of the purchase price. This makes it considerably more accessible for buyers who may not have substantial savings set aside for a home purchase.

Additionally, FHA loans often allow for more flexible credit requirements, which can be advantageous for buyers who may struggle to qualify for other financing options. The lower initial costs and accepted contributions from family or gifts for the down payment can also assist buyers in meeting financing requirements. Furthermore, there are potential options for including closing costs in the loan amount or negotiating for seller concessions that can help satisfy the total amount required to close the transaction.

In comparison, conventional loans typically necessitate higher down payments (often starting at 5% or more), which might not be viable for buyers with limited funds. VA loans, while offering excellent benefits to eligible veterans, still require buyers to cover certain closing costs, which could pose a barrier if funds are tight. USDA loans cater specifically to rural homebuyers and have income limits, and while they require no down payment