FHA Loans

 

• Any past bankruptcy must be at least 2 years old and the applicant must have had good credit for at least 2 consecutive years following the bankruptcy.
• Any history of foreclosure or short sell must be at least 3 years old the homewners have to show that they have re-established good credit.
• You must have had a stable income for at least 2 years and proof that you have paid all your bills.
• You must be able to make a 3.5% down payment, which is considerably lower than conventional loans.
• Typically closing costs and prepaid items are approximately 2-3% of the purchase price.
• Monthly payments must be roughly 43% of your gross income.
• You can assume a FHA loan from a seller or pass it on to a buyer.
• FHA loans are eligible to have interest rates reduced when the market supports a lower interest rate than the homeowner currently has. This is called the FHA streamline loan.

FHA also has eligibility requirements for the home. Properties that are eligible for a FHA loan include: single-family homes, 2-4 unit properties, condominiums, double-wide manufactured homes and modular homes. Ineligible homes include (but are not limited to) co-ops, boarding houses, commercial properties, hotels, and private clubs. A home is also ineligible if the seller acquired the house within the past 90 days. For any property over 10 acres, the loan will be based on the price of the house and the first 10 acres only. Additionally, the property must be used as a primary place of residence.
One type of FHA loan that has a couple of other specific guidelines is the 203(k) loan, which is used for buying and remodeling a home. The home must be at least 1-year-old and the rehabilitation of the property must cost less than $5,000.

VA LOANS

VA Loan Eligibility Requirements
Find out if you are eligible for a VA Home Loan
If you are considering a VA Home Loan the fastest and easiest way to find out if you qualify is by connecting to a VA Home Loan Specialist who can help to determine your eligibility, qualification level and let you know what your options are.

It doesn't cost you anything and there is no obligation. You will simply be connected to a VA Loan Specialist who will let you know how to maximize your VA benefits.

Review VA Loan Eligibility Requirements
Generally speaking almost all active duty and honorably discharged service members are eligible for a VA Home Loan.

You May Be Eligible If Any One of the Following are True:

• Served 181 days during peacetime (Active Duty)
• Served 90 days during war time (Active Duty)
• Served 6 years in the Reserves or National Guard
• You are the spouse of a service member who was killed in the line of duty.

Conventional vs VA Loan
See the unique advantages of a VA Loan
Buying or refinancing a home is a very important decision. Almost as important as selecting the right home, is selecting the right loan program. There are distinct differences between VA and Conventional loans as well as significant advantages for buyers who qualify for a VA Loan.

Down Payment - VA Offers $0 Down
Conventional loans require a minimum down payment of 3% but in many cases, particularly in today's market banks are asking for as much as 10-20% down. Down payments help to mitigate the bank's risk should the loan go into default. Because a VA Loan is backed by the federal government, banks do not require a down payment making a VA Loan one of the only loan programs that can still offer 100% financing.

Monthly Payment - Save Big Every Month with VA
Because the loan is backed by the government, banks do not require PMI (private mortgage insurance), an added monthly expense required for conventional loans where the borrower finances more than 80% of the home's value.

Banks will also offer a lower interest rate to a VA borrower (typically 0.5%-1.0% reduction vs conventional). Interest rates are based on the banks capital risk should the loan go into default, but because a VA Loan is backed by the government the bank takes less risk and is able to offer a lower interest rate to you. A lower rate combined with no PMI can substantially lower your monthly payment as seen in the chart below.

VA Loan vs Conventional - Estimated Monthly Payment Savings

Loan Amount	1.0% Rate Reduction	PMI Savings	Est. Monthly Savings*
$150,000	$94	$115	$209
$250,000	$156	$191	$347
$350,000	$220	$268	$488
$450,000	$282	$345	$627

*Estimates based the borrower putting $0 down with a 1.0% interest rate deduction.

Qualification Standards - VA is More Lenient
The qualification standards for each loan type are very different. Once again, because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans making them easier to obtain.

CONVENTIONAL LOANS

A conventional loan is generally referring to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE's) like Fannie Mae or Freddie Mac. Conventional loans may be either "conforming" and "non-conforming". Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. Nonconforming loans don't meet Fannie Mae or Freddie Mac guidelines, but they are also considered coventional. Whether you're buying a home or want or refinance your mortgage, a Conventional Loan might be right for you. If you're unsure about your credit rating, or have concerns about a down payment, Conventional Mortgages can give you piece of mind with super low closing costs and flexible payment options.

What are the Conventional Loan Requirements?

To decide if you qualify for an Conventional Mortgage Loan, we will look at:
• Your income and your monthly expenses. Standard debt-to-income ratios are 28/36 for Conventional Loans. These ratios may be exceeded with compensation factors.
• Your credit history (this is important, but Conventional's credit standards are flexible). A FICO score of 620 or above is very helpful in obtaining an approval.
• Your overall pattern rather than to individual problems you may have had.

To be eligible for an Conventional mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (28% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is generally required to obtain an Conventional approval. You must also have enough income to pay your housing costs plus all additional monthly debt (36% ratio). These percentages may be exceeded with compensating factors.

What are the Conventional Down Payment Requirements?
Conventional Loans require the home buyer to invest at least 5% - 20% of the sales price in cash for the down payment and closing costs. If the sales price is $100,000 for example, the home buyer must invest at least $5,000 - $20,000.

What will be my Interest Rate?
The interest rate for your home loan will be determined by the type of loan program that you qualify for and your credit score. You might be asking yourself what is the formula to calculate interest rates? Interest rates are driven off of Mortgage Backed Securities (MBS) which are commonly referred to "mortgage bonds". These value of these bonds determine whether the interest rates rise or fall. Your final rate will determine your payment using the standard calculate mortgage payment formula. Please contact one of our loan officers to see what is todays lending mortgage rate.

USDA LOANS

A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you purchase a home with NO Money Down. USDA Loans offer 100% financing to qualified buyers, and allow for all closing costs to be either paid for by the seller or financed into the loan. USDA offers some the lowest rates of any loan, and you will always have a fixed interest rate.

Am I Eligible for a USDA Loan?

USDA Loan Eligibility will be determined by three factors:
Credit Worthiness: When an underwriter reviews your credit history on a USDA Loan the major thing they will be looking for is a history of paying your bills in a timely fashion. If you have had blemishes in the past they may be overlooked as long as you have reestablished your credit over the past 12 months. Generally, any open judgments or collections will need to be paid off before you close on your new home.

USDA Loan Income Restrictions:
You will need to be able to document your income on a USDA Loan. USDA will generally want to see a two year history of employment or consistent income. Exceptions on the two year requirement can be made for applicants such as students. On a USDA Loan Assets are not required for approval, but can help overcome any possible blemishes on credit.

Where you Live:
In order to qualify for a USDA Loan your home must be located in a designated USDA rural area. You can check the USDA eligibility of your county. It might surprise you just how many areas of the United States do qualify for these no money down home loans. The goal of the USDA loan program is to help our nation’s smaller, rural communities thrive by making land and property more affordable.