Choose your loan, before you shop for your home. There are two main types of loan catagories; Conventional Loans and Government Loans.
The loan options available to you will be determined by:
* Down Payment
* Loan Amount
* Loan to value or need for mortgage insurance
* Credit score
* Property Type
Down payment: If your assets allow a down payment of 10% or more then a conventional loan may be a worthwhile consideration. The mortgage insurance costs will be lower and it may be possible to remove the mortgage insurance earlier than on the government counter part. FHA requires a minimum 5 year current payment history where as mortgage insurance is written for a minimum of 24 months. - That is without additional principle reduction, in which case the mi would be removed.
Loan Amount: If your loan amount is $417,000 or below in the continental US, an FHA, VA, USDA or Conventional loan are your options. If over the $417,000 then your transaction would fall into the JUMBO loan category. September 2011 is the latest that FHA loans may be funded up to the $417,000 loan amount. We will have to see what the new maximum loan for FHA will be after that date.
Loan to Value: If your down payment will be less than 10% then you'll fare better with a government loan. FHA still requires 3.5% down payment all of which could be a gift or a combination gift/grant etc. VA requires no down payment from qualified Veterans with full eligibility. USDA also provides 100% financing however, the property be located in a less populated or rural area.
Credit Score: Credit scores play an important role in the options for financing. If you combine scores and down payment... 680 is the minimum mid credit score allowable for a conventional loan with a down payment under 20%.
Property Type: Not all loans are available for all types of properties. Most notably, condominiums. Condos need to meet certain requirements for both FHA and conventional loans. The approval requirements are quite stringent. Some condo's meet FHA standards, some Fannie Mae and some both or VA. Most condos will not be in an area that conforms to USDA requirements.
It is for all of the above reasons that wise buyers start early with an informed lender. A lender that presents all options available. Some options are more attractive to the lender, or broker... but an alternative program or layered program might prove the most advantages to a customer.
Pre qualification is as much about finding the options available to you as it is choosing which option or combination of options will be best as it is to satisfy yourself,( the Seller and agents) about your ability to conclude a positive end and close the purchase transaction.
For questions or more information feel free to contact me at: ipierson@teamvitek.com
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