If you have any further questions about the finance portion of your purchase or would like to be pre-approved (or a no-obligation second opinion and quote) by a trusted and knowledgeable lender, please contact me for a referral.
This program is reserved only for past and present military service members and their families. This program can be secured through most lenders but is managed by the Department of Veteran Affairs. It can be used to finance up to 100% of a home’s purchase price at current market rates and with no mortgage insurance requirement, eliminating the need for any down payment. This program allows for credit scores all the way down to the mid-to-lower 600 range.
REQUIREMENTS –You must be an eligible Veteran or married to one and applying together. The loan amount cannot exceed specified limits depending on the location. There is a one-time upfront VA funding fee that is usually required unless the veteran was disabled in the line of duty or a few other exceptions. The amount of this fee varies and can be financed into the loan.
EXCEPTION(S) TO RANKING- If you are making a large down payment, especially 20% or more, then paying the required upfront VA funding fee would not make sense. Conventional Financing would have just as favorable a loan while not requiring the upfront funding fee.
A Jumbo Loan is any mortgage in an amount above conventional conforming loan limits. Since these loans are not eligible to be purchased on the secondary mortgage market by Fannie Mae and Freddie Mac, they tend to carry higher rates and are much harder to qualify for than any of the other options.
REQUIREMENTS – Jumbo Loans require a very large down payment, most often at least 20% or more. Jumbo loans also require high credit scores and a low debt-to-income ratio.
This program is available through most lenders to any who meet the underwriting guidelines as set by the Federal Housing Administration. FHA offers current market rates and only requires a 3.5% down payment, all of which can be gift funds. This program allows for credit scores all the way down to the mid-to-lower 600 range and has far more lenient debt-to-income ratio requirements and other underwriting standards as opposed to conventional financing.
REQUIREMENTS – A one-time upfront FHA mortgage insurance premium of 1.75% is required but can be financed into the loan. FHA also requires an ongoing monthly mortgage insurance premium to be paid along with your regular payment. This monthly mortgage insurance can vary depending on down payment and terms of the loan so ask a loan officer for more details. The loan amount cannot exceed specified limits.
RANKING- Don’t let this program’s fourth place ranking throw you off. This popular program accounts for a lot of new mortgages and for many it is not only the best option, but the only option.
This program is available through most lenders to any who meet the strict underwriting rules as set by the two largest buyers of mortgages on the secondary market, Fannie Mae and Freddie Mac.
REQUIREMENTS – You must verify that you have at least 5% of yourown funds, 3% of which may be a gift.Private mortgage insurance, or PMI is required if there is less than a 20% down payment. The loan amount cannot exceed specified limits.
EXCEPTION(S) TO RANKING- If you have a credit score below 680 and/or have a higher debt-to-income ratio, then FHA may offer better terms.
This program is available through most lenders but is overseen by the United States Department of Agriculture or USDA. It offers 100% financing at current market rates with low mortgage insurance and allows for credit scores all the way down to the mid-to-lower 600 range.
REQUIREMENTS – You must be buying in an eligible rural area and not make more than the allowed income. A one-time upfront USDA guarantee fee of 2% of the loan amount is required but can be financed into the loan, and with a low annual premium that is paid monthly.
EXCEPTION(S) TO RANKING –If you are making a large down payment, especially 20% or more, then paying the required upfront USDA guarantee fee would not make sense. Conventional Financing would have just as favorable a loan while not requiring the upfront or monthly funding fees.
THE FIVE MOST COMMON LOAN PROGRAMS
IN THE ORDER YOU SHOULD CONSIDER THEM
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