A Quick Look at Three Mortgage Loan Options: Which Loan is Best for You?
When you are shopping for a mortgage loan, there are many variables. Ultimately, there are three general tiers to choose from. Depending on your needs, you can start with the help of your lender to learn what you qualify for to know where to start. Once you have determined the best type of loan to meet your needs, you can drill down to options within each tier.
Let’s take a look.
One of the more popular types of government loans is the FHA loan. An FHA loan is a way for Americans with lower credit scores unable to put down 20% on a new home achieve homeownership. How do you find the best FHA Lender?
First and foremost, you need to qualify. Almost anyone can qualify with the minimum credit score of 500 and a debt to income ratio of 43 percent or less. This includes your mortgage payment.
Do your research. Look at multiple different companies and get quotes so you can compare and see which one can offer you the best rate on your mortgage. Getting pre-approved will help you understand your budget.
Once you have found a house you love, it’s time to fill out your FHA loan application. Fortunately, you can apply online or submit your paperwork directly to your mortgage lender. All homes purchased with an FHA loan are likely to need an appraisal to determine the home is up to the standards of the Federal Housing Administration (FHA) and established the value of the home.
The application process and closing on an FHA loan can take from a few weeks to a few months. Having an efficient underwriter and lender can make all of the difference between getting into your dream home quickly or having to wait the extra month. Make sure you do your homework and choose a lender whose reputation fits your specific needs.
To learn more, research FHA lenders and read the article in full, go to www.consumeraffairs.com/finance/fha-loans/#how-to-apply
So what is the difference between a Conventional loan and an FHA Loan?
Conventional loans are popular with homebuyers who have a strong credit history, stable income and the ability to make a down payment of at least 5 percent. Conventional loans are also considered to be conforming loans.
To qualify for a conventional mortgage, the property must be a single-unit home that will be used as a primary residence. These loans have fixed rates and carry a term of up to 30 years. There are a couple of options within the conventional loan category that offer homebuyers the ability to buy or refinance a home with a lower down-payment, more affordable mortgage premiums, and a more flexible approval process.
You must meet a preset income limit requirement, and have a minimum credit score of 620. These loans offered by Fannie Mae to low- and moderate-income home buyers for an amount up to 97 percent of the property value.
You will want to look for a lender that has the ability to offer you the most competitive rates with a reputation that fits your needs as the conventional loan is one of the more widely issued loans.
What if you need to get a loan for a higher amount than what is offered by a conforming conventional loan? Then you will want to seek out a Nonconforming loan.
You won’t be bound by Fannie Mae or Freddie Mac, and terms and conditions can vary drastically by lender. You will typically pay higher rates because they are riskier to the lender. These loans require a down payment of at least 20 percent. Typically, you will also have a higher mortgage interest rate than conforming loans.
The advantage is that you will be able to secure a loan with a higher amount than a typical conforming loan. Your lender may refer to this type of loan as a Jumbo Loan. Jumbo loans are issued by private lenders such as banks and other financial institutions. The private lenders set their own rules on requirements and approval and normally hold the loans as an investment.
To qualify for a Jumbo Loan or a Super Jumbo Loan, you must have a large income, as well as ample assets. You must also have an excellent credit history, high credit scores and a low debt-to-income ratio.
To learn more about the various loans available, go to www.consumeraffairs.com/finance/types-of-mortgage-loans.html