Finding a house you like is difficult enough without thinking about how you’re going to pay for it. There are many loans available to prospective home-buyers. Everyone from the VA to Fannie Mae offers potential solutions. Even the Federal Housing Administration (FHA) can provide a subsidized loan if you qualify. This article is not financial advice but merely an introductory course to home mortgage loan – always speak with a professional before signing anything.
We’ll cover the basic, so you understand enough to speak with a professional about your options.
According to USNews, “FHA loans are a popular solution because they allow for smaller down payments, while also resolving some of the underwriting challenges borrowers face.”
As with other loans with a below 20% down-payment, you will be required to pay private mortgage insurance but, unlike others, you will pay the insurance for the life of the mortgage loan.
Read a full breakdown of FHA loans here.
Per the Veterans Affairs itself, a VA purchase loan can “help you purchase a home at a competitive interest rate often without requiring a down-payment or private mortgage insurance.“
Of course, VA loans are specifically for veterans and military members. In the past, VA loans have suffered from longer closing times and strict conditions for approval. These days, however, improved efficiency and the ability to incorporate repairs costs into the loans make this a viable option for our military.
Read a full breakdown of FHA loans here.
Per the USDA, they “assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”
Unlike the other loans in this article, there are specific location requirements to be eligible as it’s intended to serve rural communities. If you think you may be eligible, then read a full breakdown of USDA loans here.
While there are costs associated with a lower down-payment, Freddie Mac breaks down the math behind private mortgage insurance.
“The cost of PMI varies based on your loan–to–value ratio — the amount you owe on your mortgage compared to its value — your credit score, and the insurer, but expect to pay between $30 and $150 per month for every $100,000 borrowed.”
Any conventional loan with a lower than 20% down-payment will require PMI the alternative can be quite difficult.
As Forbes suggests, there may be other things at play for that capital, “A lower down payment can keep more of your cash liquid in case life circumstances require a cash expenditure in the near future. Without this cushion, you could potentially put your home (and living situation) in jeopardy.”
No matter what your situation is, a professional real estate agent or lending officer can walk you through all your viable options. As long as you make a sound decision, then you can enjoy your home and sleep easy at night.
If you’re interested in buying a home, speak with Chelle at DoorTru Real Estate. She works tirelessly to make sure you get the home you dream of for the price you can afford.
