Home Purchase: As a Mortgage Lender Since 1997, I am very knowledgeable in Conventional, FHA, VA & Rural Development loans (RD Loans). I can explain in layman terms the differences in loans, and help find the best option to fit your needs. Below is a brief synopsis of each loan I specialize in. This is a very limited description, usually a more thorough discussion is advised for a prospective buyer to gain more knowledge and understanding each program.
Conventional Loans: Conventional Loans require a larger down payment than other loan types. Typically, you see down payments on conventional loans in 5% increments as the PMI rate drops for each additional 5% down. Advantages with a Conventional Loan is that the PMI may be cheaper than RD’s version of mortgage insurance, and is almost always cheaper than the FHA loan’s version of mortgage insurance. For example, down payments of 20% or more require no PMI on Conventional Loans. Additionally, the home owner may have the PMI eliminated after 2 years of timely payments if they can prove 20% equity. A disadvantage for many home buyers is the larger down payment requirements for conventional loans. Another disadvantage is they can be more difficult to be approved than FHA, VA & RD Loans, based on such things as time on the job, debt-to-income ratios, credit and verifying savings for the down payment. To see a company PMI rate chart click here.
Conventional 3% Down HomeReady by Fannie Mae: HomeReady is an affordable low down payment mortgage product designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in low-income communities. HomeReady fits buyers who need flexibility with down payment and income qualification, homeowners who want to refinance to lower their monthly payments, or borrowers who meet the income eligibility. Click Here for more information.
Conventional 3% Down Home Possible Advantage by Freddie Mac: Home Possible mortgages offer low down payments for low- to moderate-income home buyers or buyers in high-cost or underserved communities. This program is perfect for first-time home buyers, millennial’s, and other under-served costumers. Home Possible Advantage comes out ahead with broad income eligibility, refinancing options, manual underwriting, and with a home buyers education. Click Here for more information.
FHA Loans: FHA loans only require 3.5% down, all the money could be gifted from a close relative. FHA interest rates may be the lowest rates available, often the lender pays the borrower at closing on the HUD-1/Closing statement, rather than the borrower paying the lender. This is known as a “Lender Credit” which offsets 3rd party closing costs, property taxes, and insurance. Underwriting guidelines are more lenient for FHA loans than perhaps any other conforming loan. The disadvantage with FHA loans is that the mortgage insurance paid in the monthly payment is higher than any other loan type. Please let me know if you would like more information on how Lender Credit’s may offset 3rd party closing fees and/or property taxes & insurance. (FHA Approved Condo Website)
VA Loans: VA Loans, in my opinion, offer the best terms of any mortgage type, aside from a 20% down Conventional Mortgage. And why not…? The VA mortgage is one small benefit we can show as a thank you and as our appreciation towards men & women who have protected our freedoms by serving in the Armed Forces. The VA Loan is a zero down loan, with low interest rates, and no monthly mortgage insurance! Contrary to some people’s opinion, the VA loan is NOT a hassle, and they often close as quickly as FHA Loans – within 28 days. The disadvantages of a VA loan are very limited (if any), and would usually apply specifically based on the particular transaction. Veteran’s – Please let me know if you need assistance in obtaining your “VA Certificate of Eligibility” necessary for a VA home loan. To view the VA approved condo website. Click here. To view official government sponsor VA Home Loan Website. click here.
RD Loans: These loans are almost identical to a VA loan in that they are zero down and have very good interest rates. The main difference is that they do have some mortgage insurance, called a “guarantee fee” paid to the USDA and is part of the buyer’s monthly payment. The RD Loan also takes longer to process and close than other loan types. There are income limits, and the house has to qualify as being in an “eligible area.” However, you might be surprised as to what areas do qualify as being in eligible areas – you don’t need to buy in “Timbuktu”. Please let me know if you would like me to send you a link to the RD website, or if you need information on the Income limits for the County you wish to purchase in.