Are you thinking of purchasing a home? Whether you are a first-time home buyer, or a Real Estate veteran, you might not be aware of all the loan products available to help you make this purchase.
VA Loans: If you are a veteran or active military or reserve member, or a surviving spouse, you can utilize a VA loan. These loans require no down payment, and typically the closing costs are paid by the buyer. These loans go through the VA, and can sometimes take longer to complete. Usually, if you have money for a down payment and a good credit score, a conventional loan will end up being less expensive, as they don’t have as many upfront or add-on fees.
USDA Loans: These loans can only be used in areas considered to be “rural development areas”- but depending on where you live, that could encompass a lot of options. These loans require no down payment. You can either pay your closing costs or ask the seller to pay them. There are income limitations for using this type of loan- but if you qualify, they are usually a lower cost loan than an FHA loan.
FHA Loans: These are usually a little easier to qualify for than a conventional loan, and don’t have as high of credit score requirements. You will need a 3.5% down payment, and can either pay your own closing costs or ask the seller to pay them. There are no income limitations with an FHA loan. Like the VA and USDA loans, the buying and approval process can take a little longer because you are working with a government agency. You will have mortgage insurance with these loans, which can raise your monthly payment.
Conventional Loans: If you have a good credit score and at least 5% down payment, this is most likely your best option. These loans have fewer condition requirements of the home, and no income limitations. You can either pay your own closing costs or ask your seller to pay them. If you put less than 20% towards your down payment, you will need mortgage insurance- but it’s typically cheaper than FHA mortgage insurance. There are usually less fees and costs than with an FHA loan, but these can be a little harder to qualify for and will require a higher credit score.
These are your basic loan programs. In addition to this, certain lenders may offer special programs for first-time home buyers, or for buying a home with multiple units (like a duplex or one with rental space).
As I suggest with any loan, do your homework on your lender to make sure you are working with a reputable, consumer-friendly mortgage company- your friendly local credit union is a great place to start!
It’s okay to not be completely sure of which program you’re most interested in- that’s why your lender is there to help you navigate the waters of interest rates and escrow accounts.
Go forth and house hunt, you soon-to-be home-owner, you!