What Type of Mortgage is Right for Me?
To answer that question, you must first must decide what type of property you are purchasing to get a mortgage? Is it a:
• Primary Home
• Second Home
• Rental Property
• New Construction
• Fixer upper or Flip
Is the property a Single Family, Multi-Family, Condominium, Townhouse, Mobile Home?
The down payment for a mortgage also determines the type of mortgages that are available. Not to worry though! I am here to help and there are many options available based on minimum credit and income requirements.
Conventional, also referred to as Freddie or Fannie Mortgage loans, are ideal for borrowers with good to excellent credit who have the cash on-hand needed to make the required down payment 20%. Generally, the minimum credit score is 660. You can put down less than the 20% but private mortgage insurance (PMI) may be required. Eligible properties include owner occupied, second home, and investment properties. Both fixed and adjustable-rate conventional loans are available.
A jumbo loan is for those borrowers seeking to purchase a home anywhere from $453,100 up to $3 million. Generally, the minimum required credit score is around 680-700. A 20% down payment is normal. But there are numerous programs available that allow for lower scores and less of a down payment. Home buyer debt-to-income ratio should not exceed 43%. Eligible properties include primary residence, condos, planned unit development, and leaseholds. Both fixed and adjustable-rate jumbo loans are available.
First of all, mortgage loans insured by the Federal government present less risk to lenders. So the lender has greater flexibility when it comes to credit scores and down payment requirements. Types of government-backed loans include:
• FHA —
Backed by the Federal Housing Association (FHA), are ideal for the first-time home buyer who may have a lower credit score and lack the full 20% down payment. Buyers may borrow up to their county loan limit, which may exceed the conventional limit of $453,100. FHA loans often allow for down payments as low as 3.5%. Generally, the minimum credit score is 580. FHA offers a better interest rate for borrowers with higher credit scores. Both fixed and adjustable-rate FHA loans are available.
• FHA 203(k) —
The FHA 203(k) is designed for those home buyers in the market for a “fixer upper.” A borrower can obtain an additional $35,000 or more in financing to pay for eligible repairs and rehabilitation to a single-family home prior to moving in. Some restrictions apply. Both flat and adjustable-rate FHA 203(k) loans are available.
• VA Loan —
Backed by the Department of Veterans Affairs, VA loans up to $453,100 or more are available to veterans, surviving spouses, and those currently serving in in our nation’s military. VA loans have some of the best features and benefits for borrowers available. They include a loan-to-value (LTV) up to 100%. Generally, the minimum credit score is 620. No Private Mortgage Insurance (PMI) is required and the necessary VA Funding Fee may be financed into the loan.
These loans allow Veterans to buy a home with little or no down payment, depending on their eligible entitlement. You must obtain a Certificate of Eligibility (COE) which includes honorable discharge following 90 consecutive days served during wartime, 181 days to two years during peacetime, or a minimum of 6 years in the National Guard or Reserves. Furthermore, surviving spouses of a service member who died in the line of duty or as the result of a service-related injury and never remarried are also eligible. Both fixed and adjustable rate VA loans are available.
• USDA —
Backed by the US Department of Agriculture, this federally insured loan is ideal for low and middle-income borrowers looking to purchase a primary residence in a small community or other USDA designated rural areas. A USDA loan requires no money down, little mortgage insurance and offers flexible credit terms. Closing costs can be paid by the seller or rolled into the loan. With USDA loans, 100% of the purchase price can be financed, as well as the 1.0% Guarantee Fee charged to offset operating costs of the program. USDA only offers a fixed-rate mortgage. Generally, the minimum credit score is 640. USDA adjustable-rate mortgages are not available.
I look forward to working with you and answering any questions about your upcoming mortgage.