01/10/2022
Hey y’all! Happy Monday!
Starting off the week with some informative real estate information!
Listed below are 4 common types of home loans.
FHA loans – Backed by the FHA, these types of home loans assist borrowers who don’t have a large down payment saved up or don’t have pristine credit. Borrowers need a minimum FICO score of 580 to get the FHA maximum of 96.5% financing with a 3.5 percent down payment; however, a score of 500 is accepted if you put at least 10% down. FHA loans require two mortgage insurance premiums: one is paid upfront, and the other is paid annually for the life of the loan if you put less than 10% down, which can increase the overall cost of your mortgage. Lastly, with an FHA loan, the home seller is allowed to contribute to closing costs.
USDA loans – USDA loans help moderate- to low-income borrowers buy homes in rural areas. You must purchase a home in a USDA-eligible area & meet certain income limits to qualify. Some USDA loans don’t require a down payment for eligible borrowers w/ low incomes. There are extra fees, though, including an upfront fee of 1% of the loan amount (which can typically be financed with the loan) and an annual fee.
VA loans – VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. VA loans DON’T require a down payment or mortgage insurance, and closing costs are generally capped and may be paid by the seller. A funding fee is charged on VA loans as a percentage of the loan amount to help offset the program’s cost to taxpayers. This fee, as well as other closing costs, can be rolled into most VA loans or paid upfront at closing. Many lenders offer the lowest rates possible on VA loans, and some are willing to accept lower credit scores.
Conventional loans-
These mortgages are the most common. That said, conventional loans do have stricter regulations on your credit score and your debt-to-income (DTI) ratio.
You can buy a home w/ as little as 3% down on a conventional mortgage. You’ll also need a minimum credit score of at least 620 to qualify. You can skip buying private mortgage insurance if you have a down payment of at least 20%.
However, a down payment of less than 20% means you’ll need to pay for PMI.
Conventional loans are a good choice for most borrowers who want to take advantage of lower interest rates w/ a larger down payment.
