If you're shopping for a home and will be financing it, here's an excellent short primer to help you get started in finding the proper mortgage, from Jeff Belonger:
What is the best mortgage program for me?
When shopping for a mortgage, it can be confusing at times, depending on where you get your information. You should not always base your information on such terms as Expert, Mortgage Expert, FHA Expert, etc, etc. Just because someone says they are an Expert doesn't always mean that they are an expert. There are so many variables to what mortgages are good for a borrower.
How does a borrower determine what is good for them? What things should be important? Make sure ....
-- you understand your finances first, that you are not forcing yourself into the mortgage payment. Have a comfortable mortgage payment in mind.
-- you have some cash reserves after you would go to settlement on your new home. In my opinion, you should always have some type of cushion for many reasons.
-- you have goals for the near future and distant future, prior to speaking to a loan officer. Such goals as having kids, schools, saving money, career changes, etc, etc.
Before you shop for a home, know what you can qualify for. Shopping for a mortgage first can be so critical.
Basic types of mortgage programs
Important Basic Info - If you typically have a credit score of 680 or less and less than 10% down, you are usually better off with a FHA loan. Not unless you fit some of the requirements of the other loans mentioned below. Here is a good example of this : A real comparison with 20% down - FHA loans vs Conventional loans (series of down payments)
Conventional Loans - You need a 620 or higher credit score with typically 5% or more down. Important reminder : You still need to be approved by the PMI companies and not just your lender. (Private Mortgage Insurance)
FHA Loans - Buyers & Sellers, don't always listen to your realtor if they talk negative about FHA mortgages. There are so many good qualities when it comes to FHA loans as opposed to the other types of mortgages out there. Less money down, flexible credit requirements, lower credit scores with less pricing adjustments, etc, etc. One Important Factor : You can still do a manual underwrite on this type of loan. If the lender thinks it is a make sense deal with good compensating factors, then they can put their stamp of approval on this type of loan.
VA Loans - 100% loan program with no monthly mortgage insurance. Important factor : No matter what part of the service, even if in the guard or reserves, as long as you served 3 months in a combat zone, you can be eligible for the VA loan now.
USDA Loans - 100% loan program with no monthly mortgage insurance. This program is area restrictive and has income restrictions. How do you find out if your property qualifies? Property Qualifications Important Reminder : As of now, funding for USDA loans are becoming very low. Please read this announcement. Important USDA funding information. For more basic information on USDA loans, please read : USDA loans
Stated Loans - This type of loan still requires a job, but you just state your income. Word to the wise though - Your income is still suppose to make sense in regards to the job that you have. This loan is more so for those self-employed or who have hard to improve income. And these types of loans usually require higher credit scores and a higher down payment of 25% or more.
No Doc Loans - This is the no questions asked loan. You don't need tp put down any job or income or to verify assets. Important Key Reminder : You usually need credit scores of 680 + and with at least 30% or more down.
Summary : It's very important to speak to a very qualified loan officer and not someone that just sounds nice and or offers you the best rate. Sorry, but anyone can do this. Some important mortgage shopping tips so you aren't caught with your pants down. Mortgage Shopping Tips
Important Reminder : Your loan officer should be interviewing you in detail. These are some important questions that they should be asking you. Jeff Belonger’s top ten questions when qualifying a borrower.
And be careful of what mortgage programs that some loan officers recommend. Sometimes they just give you the program that best suits the loan officer and not the borrower, because it's easier for the loan officer. Sorry, but this is a reality and I have seen it happen.
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For more information on FHA loans, please go to this link. The FHA Expert
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!
Important Information about the First Time Homebuyers Tax Credit
Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc