Bank Mortgage Loans

What Are Your Options?

There are two different categories of loans. The first is something called a conventional and the second falls under the government type of loan. Under those two categories there is a sub category called fixed, adjustable and a mixture between the two.

Type Of Loans:

A mortgage loan that does not fall under a FHA, VA or an RHS loan is considered to be a conventional loan.

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), provides these types of mortgage loans. FHA loans are unique and popular because they provide these characteristics:

  1. Low down payments 3% – 5%
  2. Loan qualifications can include lower income and not so great credit scores.
  3. Even with the lower requirements these loans can be used for some of the higher priced homes. Recently the government has increased the amount of loan that can be used to pay for a home.
  4. FHA loans are not hard to find. Yet it is worth your efforts and time to shop around for the right lender who will walk you through the process.

VA loans

VA loans are guaranteed loans provided to service men and their families. Characteristics of this kind of loan are:

  1. No down payment
  2. Easier to qualify than for a conventional loan.
  3. Geared to service men active status in the military or retired.
  4. Generally VA loans can be used for higher priced homes.
  5. Better than a FHA loan and accepted more by sellers.
  6. VA-guaranteed loans are as easy to find and apply for as a FHA loan.

RHS Loan Programs

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture are loans granted to rural residents, This type of loan is similar to the FHA where the down payment and closing cost are minimal.

Conventional Loans

Conventional loans are the hardest to get and generally require a 20% down payment. You can still find lenders that will do a 10% or 15% down, but they are hard to come by. If you are buying any kind of home that is considered attached, then bet the bank will not even want to talk about anything less than a 20% down payment.

What makes this loan different from the rest? Almost all other loans that do not carry the 20% down payment requirement will charge you an insurance fee for about three years. This insurance payment covers the the missing 20%. What this does is increases your payment from about $300 – $500 dollars a month.

To avoid the added insurance cost, you will need to put no less than 20% down. This is the one thing that will turn a buyer off to purchasing a home with a conventional loan. Often times it is better to start off with a FHA loan and then in a few years refinance into a 30 year fixed conventional loan. What this will do is drastically reduce your payments each month.

Conventional loan limits often change each year and it is best to find a good loan officer that can explain everything to you in detail.