We have been saying that this is the perfect time to purchase a home if you are in the market. Typically, however, one major obstacle must be overcome for homebuyers to succeed in a purchase. A homebuyer must secure a home loan.
Historically, homebuyers sought conventional loans. Essentially, these are loans not guaranteed by a federal agency. They typically require excellent credit, and also process quickly. However, if a conventional loan is not the right fit for you, did you know there are also loans backed by government agencies? These loans have different qualification requirements, and oftentimes buyers will find they qualify for a different type of loan, thus allowing a home purchase to succeed. Below, see some basic information on government-backed mortgage loans.
FHA Loan: This is a loan insured by the Federal Housing Administration (FHA). This loan allows as little as a 3.5% down payment. Also, lower credit scores may be approved with this loan. This is a substantial opportunity for homebuyers who are able to afford monthly payments, but do not have a large chunk of cash available for a down payment. This loan type does require the borrower to pay for mortgage insurance, thus increasing monthly payments.
VA Loan: These loans are available to military veterans and active military members, and backed by the Department of Veterans Affairs. The beauty of these loans is they do not require a down payment, and they do not require mortgage insurance. There are fees to fund the loan amount, however. These fees vary based on several factors (military category, whether you are receiving a VA loan for the first time or subsequent time, and whether you make a down payment). While the requirements are less stringent than conventional loans, borrowers must still show sufficient income for payments. The VA website offers more information: http://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
Photo courtesy Alex Pullen
USDA Loans: A USDA loan is backed by the United States Department of Agriculture. The home purchase must occur in an eligible rural area, as defined by the USDA. Also, the homebuyer must qualify for the loan. Over the years, we have worked with several buyers in our area who qualify for USDA loans, and utilize them for their home purchase. The income limits vary based on household size and location. These loans do not require a down payment, and they are a fixed rate loan. These loans do, however, require mortgage insurance, and there is also a minimum credit score required. The USDA website offers additional information and eligibility tools: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
As real estate professionals, we appreciate the variety of home loan types available, as the flexibility allows more people to purchase a home. The above information is a basic overview; you may be curious to know if you qualify for one of these types of loans. Please contact us; we will gladly put you in contact with one of our local lenders who will be able to assist you in this process!
This post has been provided courtesy of The Durango Team Real Estate.
