Home Loans 101 – Purchases -
Home loans may seem intimidating but are actually quite simple. There are several types of loans. The type you choose would depend on a few things. You may even qualify for several but one may be better suited for your particular situation.
If you are a Veteran or Active Duty Military the obvious choice is the VA Home Loan. It allows for no down payment, no monthly mortgage insurance and the seller of the home can pay all of the buyers’ closing costs.
If you are a first time home buyer or at least won’t own another home by the time you go to closing, you can choose the USDA 100% Guaranteed Rural Housing Home Loan. This loan allows for no down payment, a low monthly mortgage insurance payment and the seller can pay all of the buyers’ closing costs. There are some income limits but they are substantial amounts.
If you happen to have a low credit score or earn more the USDA allows, you may decide to go with FHA. There is a 3.5% down payment but this amount can be gifted by a relative. The seller can pay all of the buyers’ closing costs and the guidelines on this loan product allow higher debt to income ratios.
If you have at least 3% down payment, you can go with a Conventional loan. Any down payment less than 20% will require monthly mortgage insurance. These amounts differ according to credit score and percentage of down payment. And, seller’s assistance with closing costs differs depending on the percentage of down payment.
Here are a few examples for your review and reference. All are based on a purchase price of $170,000.
VA Home Loan with at least 10% military disability income- $763 principal and interest, $60 for home owners insurance and $90 for property taxes= $913.38 total housing payment.
USDA 100% Guaranteed Rural Housing Home Loan - $734.69 principal and interest, $72.27 mortgage insurance, $60 home owners insurance and $90 for taxes = $1001.22 total housing payment.
FHA with 3.5% down- $749.55 principal and interest, $118.23 mortgage insurance, $60 home owners insurance and $90 for taxes = $1017.78 total housing payment.
A quick search for homes in this price range shows a large availability. Plus, interest rates continue to be very affordable. If you have any questions about how the home buying process works and to find out how much home you qualify for, contact a trusted mortgage professional. It’s a lot easier than it seems.
Written by: JoAnn Moore, Licensed Mortgage Professional, NMLS #165477, Owner and President of The Mortgage Market of Delaware, Georgetown, Delaware. Office 302.855.1306, Cell 302.236.1229, MMODJoAnn@aol.com