Understanding Realty
Home Loan Programs
You have found that dream home, now which of the home loan
programs is right for you? There is no simple answer to that
question; home loan programs need to be studied to choose what is
best. This all depends upon your individual family preferences and
financial circumstances.
Some factors to consider when choosing from the different home
loan programs. Your current financial situation, do you expect this
situation to change? How comfortable are you with a changing
mortgage payment? A fixed rate mortgage can save you thousands in
interest over the period of the loan, but it will also give you
higher monthly mortgage rates. An adjustable rate will start you out
with lower monthly payments but you could face higher monthly
payments if the rates change.
You have decided which type of loan is best for you, now you need
to choose which of the more popular home loan programs, is the best
one for you.
Conventional loans are secured by government sponsored lenders.
They are also known as government sponsored entities (GSE’s). They
can be used to purchase or to refinance single family or 4 plex
homes with a first or a second mortgage. There are limits that are
adjusted annually if needed based on the national average of new
homes. You would need to check what the current year’s limits are
for an accurate amount if you were to choose this type of home loan
program.
FHA loans are programs to helping low income families become home
owners. By protecting a mortgage company from default they encourage
companies to make loans to families that many not meet normal credit
guidelines. Some of the highlights of these loans are. Lower down
payments can be as low a 3% versus the normal 10% requirements.
Closing costs of up to 2 or 3 per cent of the home value can be
financed, this reduces the up front money needed. The FHA also
imposes limits on the fees from the mortgage company such as the
loan origination fee can not be more than 1% of the amount of the
mortgage.
VA loans are available to military veterans who served on active
duty and were discharged under conditions other than dishonorable.
The dates for eligibility are WWII and later. World War II
(September 16, 1940 to July 25, 1947), Korean conflict (June 27,
1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7,
1975) veterans must have at least 90 days service. Veterans with
service only during peacetime periods and active duty military
personnel must have had more than 180 day’s active service. There
are other eligibility requirements. If you think you may be eligible
contact your local or state veterans’ administration representative.
The biggest factor in a VA loan is that no down payment is
required in most cases. There is no mortgage insurance payments
needed, closing costs to the buyer are also limited. You can
negotiate rates with the lender and you then have a choice of
payment plans with up to a 30 year loan.
The last loan program we will mention is called a subprime loan.
This is a loan for people with poor credit who would not qualify for
a conventional loan or a VA or FHA guaranteed loan. These loans
normally will require a higher down payment and have a larger
interest rate. This is because of the risk involved to the mortgage
company. These loans should normally be considered for a limited
amount of time such as 2 to 4 years. It is a good way to improve
your credit situation and then refinance with more favorable terms.
We have shown finding or planning that new dream house is just
the beginning of the journey into your new home. The right answer to
the question, which of the home loan programs is for you, takes
research and a honest look at your personal situation.
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