How to Choose the Right Type of Mortgage Loan

Hey Friends / Hey Family!!

Type of Mortgage LoanBuying a home and obtaining a mortgage is perhaps one of the largest debts you will ever acquire in your life. For this reason, we want to help you professionally manage that debt, and in order to do that we must find out what is important to you about your upcoming home purchase.

In other words, we want to custom fit this mortgage to your individual needs like a well-tailored dress for the ladies or a custom-made suit for the fellas. You feel me? Good! So let us discuss this some more. In order to choose the right type of mortgage loan for you, it’s worth mentioning the 4-5 types of mortgages that you will most likely encounter when speaking to a mortgage lender. Let us have a look below.

1. VA Loan – This loan is available for Active Duty Service Members and Veterans that allows them to purchase a home with zero down and no private mortgage insurance (PMI).

2. FHA Loan – This type of mortgage loan allows a homebuyer to purchase a home with as little as 3.5% down, which can also be a gift. This loan also allows for prospective homebuyers with less than perfect credit to obtain a loan in as little as 2-3 years after a bankruptcy or foreclosure. The FHA loan does, however, have private mortgage insurance on the loan on an up-front and monthly  basis.

3. Conventional Loan – These loans require as little as 3-5% down and require private mortgage insurance. However, the PMI eventually drops off once you have accumulated 20% equity in your home. Keep in mind that this PMI will usually be required for a 5-year minimum before you have it removed from this type of mortgage loan.

4. Jumbo Loans – These loans are categorized as anything above the conforming loan limit of $453,100 (in most counties – some high cost counties allow you to go higher).

5. Down Payment Assistance Loans – These loans are available for homebuyers that are interested in obtaining a grant in the form of a forgivable second mortgage that ends up being forgiven in 3-5 years after you have owned the home. Remember this is a generalization as each program has different guidelines/requirements.

Now that we have reviewed each type of mortgage loan, ask yourself the question, “Which one of these mortgages would appeal the most to me?” From there, it is time to zero in on structuring your mortgage. What I mean by structuring the mortgage is ensuring that the down payment, cash to close, and monthly payment are all within your budget for this upcoming purchase. From there your mortgage provider will be able to tell you exactly how much you qualify for and off you go… Now it’s time to get your certified prequalification form and write Your New Home Story!

If you are in the market to purchase a home and would like more information on different types of mortgage loans, feel free to contact me today at 480-800-8387 or email me to schedule your preliminary mortgage consultation over the phone.

Semper Fi!
Jimmy V.

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Buy a House With Low to No Down Payment – Here’s How

How to Buy a House With Low to No Down PaymentOne of the factors that make it most difficult for individuals or couples to become homebuyers is coming up with a big down payment. Commonly, 20%, which is common at many banks, on a $100,000 loan is $20,000.

To some, that amount may as well be $100,000 because it’s almost impossible! Fortunately, there are many options available today for potential homebuyers.

Loan Options with Low or No Down Payment

Here are some excellent loan options that offer low or no down payments to eligible applicants.

VA Loan

Offered through the Department of Veterans Affairs, the VA mortgage loan is a zero-down loan available to current or former military personnel. Although applicants can put a down payment down if they so wish, there is no down payment required.

VA loans do not require excellent credit, and they offer 100% financing. They are even available to those who have been in the National Guard or Reserves for at least six years.

First time home buyers may be required to pay a 2.15% loan fee upfront. Mortgage insurance is not required with VA loans, which alone can save homebuyers hundreds of dollars.

FHA Loan

Offered through the Federal Housing Administration, the FHA loan is probably one of the most popular home mortgage loan types for several reasons. It only requires a 3.5% down payment, and the down payment can come from a gift or an approved non-profit organization.

Borrowers do not need good credit to be approved for an FHA loan. While this may vary by lender, credit scores typically can be as low as 580 with an FHA loan.

FHA loans do require two types of mortgage insurance. One type, 1.75% of the loan, is paid upfront, and the other type, 0.85% is added to the mortgage and paid each month. Mortgage insurance can be canceled when the home reaches 20% equity.

Another big benefit of FHA loans is that their interest rates are substantially lower than conventional mortgage loans.

HomeReady Mortgage®

Backed by Fannie Mae, the HomeReady Mortgage® is a conventional loan type that offers low down payments to eligible borrowers. Borrowers can pay down payments as low as 3%.

The HomeReady Mortgage® is not just for first-time home buyers, but is open to all buyers who meet the requirements. Although borrowers of all incomes can benefit from this mortgage, it’s aimed at helping those with low and moderate incomes.

Because this is a government-backed loan, borrowers also get lower interest rates. It’s typically for borrowers who have a household income 80% less than the median income in that area. The home’s census must meet certain requirements.

Home Possible Mortgage®

The Home Possible Mortgage®, which is backed by Freddie Mac, is a conventional mortgage loan that requires potential borrowers pay as little as 3 percent down payment. Borrowers can have less than perfect credit scores and can have income from non-traditional methods.

Although Home Possible Mortgage® is designed to help low-to-moderate-income home buyers, it’s open to all incomes as long as they meet the eligibility requirements.

When you’re ready to take the plunge, or even if you’re just thinking about it, stop and visit us or give us a call. Our loan specialists are First Choice Loan Services are always ready to help you and show you what we have to offer.

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2018 Increase in Mortgage Loan Limits in Arizona

Have you heard about the three major changes  in mortgage loan limits affecting our housing market?

Mortgage loan limits in AZ have gone up for 2018 across the board on Conventional, FHA, and VA. Here’s the great news…

  1. FHA Loan limits have recently increased from roughly $279,000 all the way up to $294,515, expanding the housing market and the opportunity for you to find the perfect home.
  2. Conventional Loan limits have gone all the way up to $453,100. Why is that a big deal? Previously, if you were above $424,000, you would have been forced into the jumbo financing arena. Now this is not the case – once again allowing you to finance more and perhaps find that perfect home for you.
  3. VA Loan limits have also followed suit with regards to conventional financing, allowing a veteran to finance as much as $453,100 with no money down and no private mortgage insurance required. This makes VA Loans some of the most, if not the most, competitive financing terms available for Veterans in the housing market.
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Pros and Cons – Conventional Loan or FHA Loan?

Purchasing a home is probably the largest purchase you’ll ever make in your lifetime, so you want to get the best possible mortgage loan terms.

If you’re new to the mortgage loan process, you may be wondering whether an FHA loan or a conventional loan would be best for you. Below is info on both types of loans as well as pros and cons of each.

Difference Between FHA and Conventional Loan

While FHA and conventional loans both involve obtaining financing from lenders to purchase or refinance homes, there are slight differences between the two.

Conventional loan are mortgage loans a homebuyer or potential homebuyer gets from banks, credit unions or private lenders.

In exchange for the loan, the individual makes monthly payments that include both the principal amount and interest.

If the borrower fails to make the payments, the homeowner can lose the home through foreclosure. Both the lender and the borrower can lose their investment.

FHA loans are also mortgage loans that provide the homebuyer with money to purchase a home.

However, one major difference is that FHA loans are backed or guaranteed by the Federal Housing Administration.

With an FHA-backed loan, the lender is required to purchase mortgage insurance, which guarantees that the lender will not lose their investment if the borrower fails to make the payments.

Pros and Cons of FHA Loans

Pros

  • Lower down payment required
  • More lenient credit score requirement – consumers can get an FHA loan with credit scores as low as 580.
  • Cash and monetary gifts can be used for down payment
  • Homebuyers who previously lost their homes to foreclosure can still get an FHA loan after improving their credit scores.
  • Seller can provide up to six percent of the money for closing costs.
  • FHA loans allow individuals not living in the home to be co-borrowers.
  • Allow refinancing with lower equity amounts
  • The government backs the loan

Cons

  • Requires both monthly mortgage insurance and an upfront mortgage insurance premium.
  • There is a limit of how much a consumer can borrow based on the location of the home.
  • Mortgage insurance is much more expensive than private mortgage insurance that might be required with a conventional loan.
  • The borrower may end up paying more over the life of the loan because of the lower requirements.

Pros and Cons of Conventional Loans

Pros

  • Mortgage insurance usually not required
  • More economical for borrowers with good credit scores
  • Borrowers may pay less over time due to no mortgage insurance requirement.
  • Loan fees can be negotiated.

Cons

  • Stricter credit score requirement – Consumers must typically have credit scores of at least 600.
  • Higher down payment is required.
  • Sellers may help with closing costs but usually only up to three percent of the amount.
  • They require a certain debt-to-income ratio.
  • Because the lender determines interest rates, they can be higher than with an FHA loan.
  • More criteria goes into determining eligibility if borrower can’t pay at least 20 percent down payment.

What About VA Loans?

Veterans and military personnel also have the option to purchase a home with the help of a VA loan. A VA loan is a mortgage loan that’s backed by the Department of Veterans Affairs. These loans also come with several benefits, including the following.

  • No mortgage insurance required
  • No down payment required
  • Lower interest rates
  • Mortgage is assumable
  • No cap on the amount the homebuyer can borrow

 

 

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