MORTGAGE LOANS WHATS THE DIFFERENCE?


Purchasing Power

Are you shopping for a mortgage? Confused yet? There are different types of mortgage loans that you can choose from, and figuring out which is best for you can be confusing. As you consider these different options, you will be able to discuss the loan programs with your lender and this should help you feel more comfortable making the best decision for your current situation.

Mortgage rates are at an all time historic low according to many sources including freddie mac. Do your research and take advantage of your buying power today. Nothing lasts forever, and Mortgage Rates included, especially if you ask the experts at Bank Rate. According Bankrate who said "In the week ahead (Oct. 22-28), more than half of the experts on Bankrate's panel (57 percent) predict rates will rise, while 29 percent expect rates to fall and 14 percent think rates will remain the same".

FHA Loans

FHA loans have been making homeownership accessible for decades. This type of Mortgage Loan is built for borrowers with lower credit scores. FHA insurance protects mortgage lenders, allowing them to offer loans with below-average interest rates, easier credit requirements, and low-down payments (starting at just 3.5%). 

FHA loans are especially popular with first time, lower-income, and/or lower-credit home buyers, thanks to their flexibility and low rates. There’s a lot to love about the FHA home loan. Here are some of the biggest benefits.

  • Lower down payment: FHA allows a 3.5% down payment
  • The FHA loan can allow 100% gift funds for the down payment & closing costs.
  • FHA loans allow higher debt-to-income ratios
  • Typically FHA loans accept lower credit scores
  • FHA also allows extended loan sizes


FHA Loans Pros and Cons

Downsides to an FHA loan:

  • PMI never goes away
  • Many Condos Not approved
  • Must be Owner Occupied
  • Loan Limits based on region

 

 

Conventional Loans

When most people think of a mortgage, they’re thinking of a conventional loan.  Conventional loans are originated and serviced by private mortgage lenders like banks, credit unions and other financial institutions, many of which also offer government-insured mortgage loans. In general, conventional loans don't have some of the same perks as government-insured loans, such as low credit score requirements and no down payment or mortgage insurance.

Thanks to their wide availability and low rates, conventional loans are the most popular mortgage in the U.S.

Conventional loans have no special eligibility requirements, and pretty much all lenders offer them. You could qualify with just 3% down and a 620 credit score.

Pros:

  • Low Down Payment as low as 3%
  • No PMI with 20% Down
  • Can be used for 2nd homes & Investment properties


Conventional Loans - Pros and Cons

Cons:

  • Higher Rates for lower credit borrowers
  • Income Limits
  • Tougher Credit Guidelines
  • Reserve Requirements – Need money in bank after down payment and closing costs.

VA Loans

For those who qualify,  the VA loan program maybe  the best possible mortgage. Out there today.

Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at very affordable cost. The VA loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).

The VA home loan was created in 1944 by the United States government to help returning service members purchase homes without needing a down payment or excellent credit. This historic benefit program has been helping veterans, active duty military members and their families purchase or refinance a home.

The VA loan asks for no down payment, requires no mortgage insurance, and has lenient rules about qualifying, among many other advantages.

Here’s everything you need to know about qualifying for and using a VA loan.

PROS

  • ZERO DOWN PAYMENT
  • NO PMI
  • DEBT TO INCOME RATIO HIGHER
  • NO PREPAYMENT PENALY
  • SURVIVING SPOUSE BENEITS
  • ASSUMABLE
  • NO MAX LOAN AMOUNTS
  • GOVERNMENT GUARANTEE
  • VA FUNDING FEE FLEXIBILITY


VA Loans

CONS

  • VA FUNDING FEE
  • CAN BE USED AGAIN BUT MUST SELL EXISTING LOAN TO OBTAIN NEW LOAN
  • MUST USE SPOUSES CREDIT

 

 

Mortgage Overview

The rule of thumb is that if you have good credit (680+) and a large down payment (5% or more), a conventional loan is often best. If you have lower credit and/or a smaller down payment, a government-loan can help.

However, those are not universal rules. The best type of mortgage for you will depend on your budget, your credit, and your home buying goals.

To help guide you in the right direction, here’s a broad overview of conventional vs. government loans, and who they’re best for:

  • Conventional loans — Privately-backed loans that tend to be most affordable for people with credit scores above 680 and down payments of 5% or more.
  • FHA loans — FHA loans are backed by the Federal Housing Administration. They’re typically best for people with credit between 580-680 and a down payment of at least 3.5%
  • VA loans — VA loans are almost always best for qualified veterans and military members. They let you buy a house with 0% down, exceptionally low interest rates, and no monthly mortgage insurance
  • For more information regarding loans, qualifications, requirements and which loan is for you click here.

LOOKING TO SELL?

For sellers, what a great time to sell! Inventory is low and motivated buyers are looking for houses for sale. Sellers don't have competition with as many property owners. Some would be sellers have decided to wait out the pandemic, but more and more buyers enter the market. This only further pushes the pricing point higher due to tight supply. Check your home's value here! or CONTACT ME HERE FOR MORE INFORMATION! 

LOOKING TO BUY?

For buyers, the inventory is slowly increasing and mortgage rates are at historic all time lows, record breaking never seen before lows. Buyers are out in force taking full advantage of their higher than usual purchasing power. It is a win-win scenario for both sellers and buyers. CONTACT ME HERE to get started!

The data is provided by Valerie M. Brown, Realtor in Las Vegas, WFG Title and from data produced by the Las Vegas REALTORS®.

SIGN UP FOR THE MONTHLY NEWSLETTER: Get the Latest Real Estate Market Data and ACCESS to see the Hottest Listings hitting the market today. 

 

References:

Loans Types: www.valleywestmortgage.com

Get Qualified: www.valleywestmortgage.com

Historic Mortgage Rate Lows: https://freddiemac.gcs-web.com

Mortgage Rate Trends: Bankrate Expert Poll.