Buyer Tip: How Do You Choose a Loan?

By
Real Estate Agent with Cedar Rapids/Iowa City, IA KW Legacy Group S44645
https://activerain.com/droplet/5gNc

There is a popular misconception out there that in order to obtain a mortgage, you must have 20% of the purchase price saved.  This is no longer true, and has not been true for a very long time.  There is no need to break the piggy bank and hand over all of your savings in order to buy a home!  There are several programs out there that allow potential new buyers to put down much less than you may think.

 

Broken piggy bank

FHA loans: These are federal backed loans funded by the Federal Housing Administration and require just 3.5% of the purchase price as your down payment.  Traditionally, most people associate this type of loan with a first time homebuyer, but that is not necessarily true.  As a condition of these loans, the property that you are looking to purchase must be inhabitable with 3 or more years of life expectancy for the roof and major mechanicals.  It must also be safe and have no peeling paint on the exterior or interior.  In addition, buyers may qualify for first time home buyer grants.  In Iowa, the Iowa Finance Authority, or IFA, has grants available to assist homebuyers with their down payment.  The grants are based on household income and family size when determining whether or not you would qualify.

 

VA loans:  The Veteran Administation loans can be up to 100% of the purchase price and the closing costs can also be funded into the loan so that there is no money out of pocket for the buyer.  You must have served in the military or are active duty in any branch.  As with FHA loans, the condition of the property needs to be livable with no major repairs required. In addition, the seller is required to order and pay for the pest inspection for this type of loan.

 

Conventional loans:  These are loans that are anywhere from 5% to 20% down payment and the condition of the property is not as regulated. There are several different types of loans in this category.  In house financing is also available which means that the bank or credit union is not planning to sell the mortgage to the secondary market. Therefore, there can be adjustable rate mortgages, otherwise known as ARM, where the rate is fixed for a set number of years and then the rate can adjust.  These types of loans also avoid PMI, Private Mortgage Insurance, which is normally required when you do not have a 20% down payment.  The loan is divided into two separate mortgages so that PMI is not required. 

 

There are many options out there for buyers and the best place to start is where you already do your banking.  Your local bank and credit union already know all about you and you have a relationship with them.  Most of the time, you can complete your application online and then a loan officer will call you to go over the options.  Or you can set up an appointment to meet with them in person as well.

 

If you need a recommendation for a lender, please do not hesitate to reach out to me.  Based on your situation, credit score, and down payment, I can recommend several great people that will take the time to discuss the options with you.   

 

Keep smiling!

 

Karen

Posted by

 

Karen Feltman, REALTOR®, ABR, AHS, CHMS,                                                                      CNE,CRS, e-Pro, green, GRI, SRES, TRC

Keller Williams Legacy Group

4850 Armar Drive SE Ste B

Cedar Rapids, Iowa 52403

Email: karenfeltman@gmail.com

Mobile  319-521-0701

www.KarenFeltman.com

Licensed in the State of Iowa

© 2010-2018 by Karen Feltman, Cedar Rapids/Iowa City Relocation Specialist 

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Topic:
Home Buying
Location:
Iowa Linn County Cedar Rapids
Groups:
Active Rain Newbies
Realtors®
1st Time Buyers
Iowa Real Estate
Addicted to Active Rain
Tags:
down payment
mortgage information
loan types
types of financing
iowa finance authority programs
karen feltman realtor

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Karen Feltman

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