Government Backed or Insured Loan Programs
Most government backed loan programs require strict appraisal guidelines on condition of home when compared to non-government backed loan programs. Typically, interest rates are lower for government backed loans compared to conventional loans. All government backed loans typically require an upfront Mortgage Insurance premium or Funding Fee. Some of the government backed loans require mortgage insurance to be paid for the life of the loan.
FHA:
Down payment of 3.5% with a credit score of 580 or higher or 10% down if credit score is between 500-579. Some lenders require credit scores of 620 or higher for either of the above scenarios. Subject to Upfront Mortgage Insurance Premium of 1.75% and Annual Mortgage Insurance Premium of .85%. Upfront fee can be rolled into mortgage. Annual Mortgage Insurance may be required for life of loan if down payment is less than 10% and must be paid for 11 years if down payment is 10% or more. Eligible for primary residence purchases only.
FHA also offers a 203K mortgage which allows Buyers to finance up to $35k into mortgage for repairs, updates and improvements.
https://usmortgagecalculator.org/fha-mortgage-calculator/
USDA:
No down payment requirement. Upfront Mortgage Insurance Premium of 1% and Annual Mortgage Insurance Premium of .35%. Mortgage insurance is required for life of loan. Upfront fee can be rolled into loan. Eligible for primary residence purchases only. Household income must be less than 115% of area median income which is approx. $78,000 in our area. Household income may be adjusted based upon several factors including number of dependents and dependent care expenses. Home must be in approved rural area.
https://www.mortgagecalculator.org/calcs/usda-loans.php
VA:
No down payment requirement. Funding fee varies based upon several factors but can range between 0% for Veterans with service-related disabilities to 2.4% for Reserves and National Guard for first time use. Average funding fee is currently 2.15% for first time use and increases to 3.3% for subsequent use. Funding fee may be rolled into loan. Must be used on primary residence purchases and users must have a certificate of eligibility. Mortgage insurance is not required beyond upfront fee. Those eligible for VA loans are; Veterans, Active-duty personnel, Reserve members, National Guard members and Surviving spouses.
Reverse Mortgage:
For homeowners who are 62 or older and own their home outright or have a small mortgage. This loan program is similar to a home equity and allows homeowners to receive up to 60% of the equity from lender either in a lump sum or monthly payments. However, unlike common home equity loans, the homeowner is not required to pay the loan back unless owner moves out of home or passes away. In the event, owner passes away or moves out, than the owner’s estate must sale home or payback loan within 12 months of owner’s death. Upfront Mortgage Insurance Premium of 2% and Annual Mortgage Insurance of .5%. This loan program does have higher origination/management fees than typical for most mortgage programs and should be thoroughly discussed with lender and all parties involved.
Non-Government Backed Loans:
Conventional:
Typically a down payment of 5% or more is required for Conventional loans and mortgage insurance will be required in most cases unless a down payment of 20% or more is made. Mortgage insurance is removed once 20% equity is gained in home either through paying down mortgage or refinance. Some lenders will not automatically remove mortgage insurance so it is best to notify lender once 20% equity is realized. No funding fee is required and appraisal guidelines are a little more relaxed when compared to government backed loans.
Jumbo:
Typically used to purchase high end homes and requires down payments of 20%-30% and a credit score over 700. No mortgage insurance.
Land/Lot Loans:
Most lenders require at least 25% down on vacant land or lot loans. However, Carolina Farm Credit offers a conventional loan program which requires only 5% down if Buyer is ready to build a home and wishes to bundle the price of land in with construction cost of home.
Fixed Rate Mortgages:
A fixed rate mortgage is typically a mortgage which offers an interest rate that does not change for the life of the loan. However, if you decide to refinance than the interest rate can change based upon prevailing rates at time of the refinance. Fixed rate mortgages may be a good idea for Buyers who plan to live in their home for 5 years or more.
Adjustable Rate Mortgages:
Adjustable rate mortgages are loans which offer interest rates for a specific period of time and can change on the anniversary dates. One of the most common Adjustable Rate options is the 5/1 ARM option which means the interest rate can change once every year after the 5th anniversary of the loan. The interest rate is locked for the first 5 years and can change once a year every year after the first 5 years. The adjusted interest rate is determined by the prevailing rates at the time of the loan anniversary. Adjustable rate mortgage interest rates are typically lower than fixed rate interest rates initially. Adjustable rate mortgages may be a good idea for Buyers who think they will only be living in their home for approx. 5 years or less. A fixed rate mortgage may be better for Buyers who think they will be living in the home for a longer period of time.
Posted By:
Jason Eldreth,Broker/Owner