Most people know they want to buy a home but don’t have all the answers when it comes to paying for it. They may be unaware of their options in terms of mortgage programs and how to get the process started when applying for a mortgage.
Knowing the basics of the four most popular mortgage programs allows you to make the best choice for you and your family regarding financing your home.
This article will explain the different mortgage programs and how to qualify for each of them when looking to buy a home.
Conventional Loan
Conventional loans aren’t backed by the federal government and are the most challenging loans to qualify for. You’ll need at least a 620 credit score to be considered for a conventional loan, but the best interest rates and terms are reserved for those with scores above 740.
While conventional loans are the hardest to qualify for, they’re also the most popular loan program today. You’ll have to come with a down payment of at least 3 percent or pay monthly private mortgage insurance (PMI) until your loan reaches a loan-to-value ratio of 80 percent.
Federal Housing Administration (FHA)
The FHA was formed in 1934 in response to the Great Depression and sought to regulate interest rates and make homeownership more accessible to more borrowers.
Today, the FHA insures mortgages with a low borrowing cost, allowing buyers to put down as little as 3.5 percent to purchase the home. However, all FHA loans come with a mortgage insurance premium (MIP) which adds to your monthly payment.
An FHA loan is a popular choice for young people and is geared towards first-time homebuyers because of the attractive requirements to qualify for the loan.
You’ll need a credit score of at least 580 to qualify for an FHA loan, while better interest rates are for those with a 740 credit score and above.
Veterans Affairs (VA)
VA loans are only accessible to past and present military members and their spouses. Qualifying for a VA loan is done by active duty members, reserves, National Guard members, qualifying spouses, and veterans.
A VA home loan is a significant benefit for service members and their families, and you’ll be able to purchase a home with zero percent down if you qualify.
Veterans Affairs loans require a “funding fee,” but it can be financed into the loan, so military members and their spouses don’t have to pay anything out of pocket.
United States Department of Agriculture (USDA)
USDA loans are the least popular and often the hardest to qualify for. Only borrowers living in rural areas designated by the government can be eligible for a USDA loan.
Qualified borrowers for USDA loans find they’re a great option since you can buy the home with zero percent down, just like a VA loan.
Final Thoughts
After reading this article, we hope you’ll have a good idea of mortgage basics and what you need to know about getting a home loan in today’s market. Once you understand your options, getting a mortgage with good financing terms is easy.
Are you ready to buy or sell? Contact Kaya Homes for a seamless buying and selling experience from trusted real estate professionals in your local market.
Find out why Kaya Homes is the leader in Long Island real estate and are your go-to realtor in the Lynbrook, Oceanside, Malverne, Hewlett, Valley Stream, East Rockaway, Woodmere, Cedarhurst, Hewlett Harbor, and Freeport area.
Mon, 15 Aug 2022 19:11:16 +0000
