Buyer’s Agent will supply you with all of the information you need about the mortgage financing process. We want to help you select the right mortgage lender and loans for your needs. Take a look at the different mortgage types and their general requirements:
A conventional mortgage is a home loan that is not formally backed by the federal government. Conventional loans, also referred to as “conforming” loans, follow the guidelines set by Freddie Mac and Fannie Mae. This type of mortgage can range anywhere from 15 to 30 years, but keep in mind, short-term loans require a higher monthly payment.
Conventional mortgages allow down payments as small as 3% of the home’s purchase price. Insurance is required when the down payment is less than 20%, but this can be waived in the future, if equity conditions are met.
Because this loan is not backed by the government, many homeowners are under the impression that this loan is harder to obtain. This is, in most cases, false, in order to qualify for a conventional loan, you need to:
- Prove that you meet income requirements and said income is expected to continue.
- You have the assets needed to cover the down payment.
- You have an adequate credit history.
Conventional loans are a great choice for homeowners who aren’t planning on living in the home long-term and are interested in an adjustable-rate mortgage. If you have excellent credit you would have lower MI premium than FHA and no upfront MI or VA funding fee so your down payment/principle balance isn’t eaten up off the bat by fees financed into the loan.
An FHA loan is guaranteed by the U.S. Federal Housing Administration. You can obtain an FHA loan through your local bank or credit union. Something to keep in mind when you are thinking about applying for an FHA loan, if you do not repay your loan, the FHA will pay the lender the money owed.
There are several benefits that come along with an FHA loan, including:
- Small down payment – When purchasing a home with an FHA loan, your down payment can be as low as 3.5%.
- Assumable loans – Assumable loans are defined as a loan that can be transferred to someone else. The person you transfer the loan to must first qualify to take over the loan. In order to qualify, a lender will look at their credit score and debt-to-income ratios to make sure that they will be able to repay the loan. The final step in obtaining an assumable loan is getting the transfer approved and filling out the required paperwork.
- Home improvement and repairs – With certain FHA loans, they can be used to fix and repair your home. For example, if you buy a home that is going to require a lot of upgrades, an FHA makes it easier to fund the purchase and pay for the improvements!
Loans backed by the Veterans’ Administration are designed as a benefit for military service members and veterans. VA loans are provided by private lenders, this could be your local bank or mortgage company.
In order to qualify for a VA loan, there are a few requirements that you have to fulfill:
- Your length of service, duty status, and character of service all play a role in your eligibility status.
- If you are an active duty service member, you and your spouse qualify for a home loan. You must have a good credit score, meet the required income, and hold a Certificate of Eligibility.
- Interest rate reduction – You may only apply for this loan if you already have an existing loan on your property. This loan helps lower the interest and reduce your monthly payments on your property. Another benefit of the IRRL is that they don’t pull a full credit report, but only a mortgage rating to see if the home loan has been paid in full on time.
- NADL Program – This program helps Native American Veterans purchase, upgrade, and construct a home on Native American trust lands. In order to be eligible for this loan, your tribal organization must be a part of the VA loan and hold a Certificate of Eligibility.
ARM vs. Fixed-Rate Mortgage
Adjustable-rate mortgages or ARMs have introductory interest rates that are below market. The initial rate expires after a set period of time, anywhere from 1-15 years. After this rate expires, it is reset to reflect current market rates according to an assigned index, such as LIBOR.
ARMs can be popular when interest rates are trending upwards, as the initial rate is significantly lower than the market. However, the future rate can be higher than what the current market would provide on a fixed-rate mortgage.
ARMs are best suited for home buyers who plan to sell their home within a few years or buyers who have the financial ability to withstand the risk of higher mortgage payments. Fixed-rate mortgages have no interest rate changes during the life of the loan.
Picking the Right Home Mortgage Loan for You
At Buyer’s Agent, NV, we advise you to shop around until you find the right mortgage for you. Here are a few questions to keep in mind when speaking with lenders:
- Which type of loan is best for me?
- What is my interest rate and annual percentage rate?
- Will there be origination fees?
- What are all of the costs associated with this loan?
- Can I lock into a rate?
- Are there any penalties for prepayment?
- Will you guarantee GFE?
- Do you handle your own underwriting?
Connect With Buyer’s Agent NV Today!
We hope that these mortgage tips have been helpful! Buyer’s Agent will work closely with your lender to assure that you are protected and that the process goes smoothly. Connect with one of our agents today for more information!