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Posted by RE/MAX Executive Realty on 4/25/2021

Photo by Alexander Stein via Pixabay

When it comes to a mortgage, most of us think of the same standard product; the 15 or 30 year conventional mortgage offered by banks and lenders. This is not the only mortgage option you have, though. Depending on your personal history and circumstances you may qualify for an attractive mortgage with lower rates and a small down payment. Examining your options and determining if you qualify for a less common type of mortgage allows you to have the greatest amount of flexibility and more options when it comes to your new home. Learning more about the different types of mortgages ensures you get the best possible terms when it comes to this significant purchase.

FHA, VA and USDA Loans: Explore your Mortgage Options

FHA Loans

An FHA loan is one that is insured by the Federal Housing Administration; if the buyer was to default or fail to pay, the FHA would pay the lender instead. Because of this guarantee, lenders are able to offer mortgages with less rigid requirements and accept more potential risk. FHA loans benefit the borrower in several key ways; they offer low down payments, credit score requirements of just 620 and that FHA guarantee for lenders. There are income guidelines and limits for the amount that can be borrowed, so you should check to see if your potential loan qualifies. A fast and easy approval process makes this a good option for many borrowers, though you should note PMI (Private Mortgage Insurance) is required and adds an additional amount to your monthly bill. 

USDA Loans

Often the most overlooked and misunderstood, a USDA loan is backed by the Department of Agriculture in the same way an FHA loan is backed by the Housing Administration. USDA loans are designed to help people in rural and suburban areas become homeowners and offer attractive rates and very low closing costs and down payments. If you are looking for a mortgage, it is worth checking your eligibility. Both your income and the home you are considering need to be eligible, but since an estimated 90% of the homes in the country qualify, USDA could be the right product for you.

VA Loans

A VA loan is backed by the Veteran's Administration and is available to active members and veterans of the US armed forces. This is the most attractive alternative to conventional loans of all, if you qualify. Designed to make it easy for service members to buy a home, this loan features little or no down payment, easy lending guidelines and appealing rates for veterans. If you qualify, the VA loan is an excellent option for your new home. 

Learning about your options makes it easy to find the right home mortgage for your situation. Chances are, you will qualify for one or more of the loan types above; you should compare the terms of the FHA, USDA or VA loan you are considering with a conventional mortgage to make the best possible choice for your new home purchase. 




Tags: mortgage   loans   FHA   USDA   VA  
Categories: Uncategorized  


Posted by RE/MAX Executive Realty on 11/15/2020

Photo by Gustavo Frazao via Shutterstock

Whether you’ve been saving up for a while or you’re just getting started, getting into a home might be easier than you think. If you’re looking to buy a home, but you just aren’t sure about tying all your savings into a house, check out the various loan options with low down payment requirements.

The Myth of 20%

A lot of misconceptions exist about the down payment required to buy a home. Particularly about the "20% down" rule. Even though many potential homebuyers think they need to save up that 20% — and they delay buying a home because they haven’t been able to — it’s actually not a rule. While it is a suggestion, and necessary for obtaining a “conventional” loan, it’s not required to buy a house. Some first-time buyers have the mistaken impression that having that 20% down somehow balances out a lack of stellar credit history, guarantees a better rate or a bigger loan.

None of this is true. It does improve your ability to qualify for a loan from a regular lender because it makes your loan easier for them to sell on the secondary market. Even with a 20% down payment, you’ll have to meet the 43% or less debt-to-income ratio to qualify for a loan. It also, however, means that you do not have to buy private mortgage insurance (PMI), which saves you the monthly outgo toward that premium.

On a side note, PMI is not your homeowner’s insurance. It is the coverage you pay for to protect your lender in case you default on your loan.

Buying with Less than 20%

You can buy a home with less than twenty percent down, and in some cases, with zero down. 

Here’s the skinny:

A Conventional 97 loan is one you may not have heard of. It is available through Fannie Mae and is a fixed-rate loan that requires just three percent down. The best part is that the down payment can come entirely from gifts by blood-related or marriage-related donors. A Conventional 97 loan cannot be greater than $484,350 (the number changes annually), requires a better than average credit score and is useful only for a single-unit dwelling. Conventional 97 loans are available to first time and returning homebuyers.

  • The HomeReady™ Mortgage is a specialty option among low- and no-down-payment mortgages. Backed by Fannie Mae, most US lenders offer it. The HomeReady™ mortgage boasts below-market mortgage rates, lower mortgage insurance fees and innovative underwriting practices. In fact, the income of everybody living in the house may qualify for mortgage-approval. That means if your parents live with you, your income and theirs are added together.
  • The Federal Housing Administration, or FHA, insured mortgage requires just 3.5% in down payment. Also, FHA loan guidelines regarding credit scores are more liberal. Borrowers that have a lower FICO score can still qualify for an FHA loan when they have a reasonable explanation for why their score is lower.
  • Active duty and honorably discharged U.S. Military members and surviving spouses are eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans offer a zero down payment options. In areas with a higher cost of living, VA loans are even available above the one million dollar mark.
  • The no-money-down, 100% financing option available to non-military borrowers is offered through the U.S. Department of Agriculture. This Rural Development Guaranteed Housing Loan is also available to buyers in qualifying suburban neighborhoods. For many borrowers, the USDA loan is their lowest cost option.

While not everyone qualifies for a lower or zero down payment loan, if you are interested in home ownership and tentative about investing a big down payment, one of these options may be right for you. Ask your mortgage broker to explain the options to you for the home of your dreams.




Tags: mortgage   FHA   20%   twenty percent  
Categories: Uncategorized  




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