Buying a home is one of the most memorable and exciting times of a person's life. Then there are a few headaches along the way. One of those headaches can be trying to figure out what kind of home loan will be the best fit for your needs. Below are the three most common home loans.
FHA- The Federal Housing Administration, known as "FHA", provides mortgage insurance on loans made by FHA approved lenders, The mortgage insurance provides lenders with protection against any losses as the result of the homebuyer defaulting on the loan Because FHA loans are insured by the government, they have easier credit qualifying guidelines than most loans, as well as low closing costs and down payment requirements. Lenders can now qualify an applicant with a 580 FICO score to qualify for the low down payment which is 3.5% of the purchase price of the home. Closing costs can also be bundled within the loan. The FHA has a variety of loan programs for first time homebuyers and reverse mortgages for senior citizens. FHA loans can be for purchases for homes and refinancing.
V.A.- A VA loan is an other mortgage loan guaranteed by the U.S. Department of Veteran Affairs. This home loan program is designed to offer long -term financing to eligible American veterans or their surviving spouse who have not remarried. This type of loan has many beneficial factors. The first great advantage with a VA loan is no down payment is required. Second, zero to 103.3% financing with private mortgage insurance. Which means, with this loan, there is no payment of primary mortgage insurance needed. The perk of having no PMI payments is the monthly mortgage payment goes directly toward the loan amount and not interest. A funding fee is charged at 33% of the loan amount, however that can be financed through the loan. VA loans allow veterans to qalif for loan amounts lager than the traditional Fannie Mae and conforming loans. The maximum amount that can be borrowed is $417,000. This amount can increase if the home is located in "high cost counties"
Conventional- These types of loans are for applicants who have good to excellent FICO scores. To be eligible for this type of loan your monthly mortgage and housing costs can must meet a specified percentage of gross monthly income which is a ratio of 28%. Lenders will approve at least a 620 FICO score. 36% of monthly income is the ratio for additional monthly debt. These loans are not guaranteed or insured by the government. A down payment of 20% or more will insure no primary mortgage insurance needed to obtain loan. Conventional loans can also be used to purchase a second home and investment property.
The best advice is when shopping for a home loan is to meet with a mortgage broker who tell of all our options as to what loan will best fit your needs and budget. A mortgage broker can also "shop" the loan around to other lenders to find a lender that will work best for you.
