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8 Reasons a Borrower Should Choose an FHA Mortgage

 

The Federal Housing Administration (FHA) is a United States government agency created in part by the National Housing Act of 1934. FHA Mortgages expand the eligibility of home-ownership to borrowers that may not fit into the typical conforming loan.  Nearly 1 in 5 home buyers use an FHA loan to finance a home. The agency is best-known for its old-fashioned 30-year fixed-rate mortgage, but the FHA also offers a 15-year fixed rate loan as well as a series of adjustable-rate mortgages.

 

    1. FHA generally has lower overall down payment requirements, typical down payments are as low as 3.5%, and gift funds can be used for the entire down payment.

   2. FHA allows lower FICO score requirements than conventional financing.

    3. FHA allows for higher debt to income ratios to qualify. That can be great for first time home buyers who may not have significant incomes but can dedicate a greater portion of their income toward home-ownership.

    4. FHA allows for a shorter time frame following major negative credit events, such as foreclosure or bankruptcy than conventional lending.

    5. FHA mortgages are assumable and in a rising interest rate environment can position the buyer to have an advantage when selling their home later. Most conventional fixed-rate mortgages are not assumable.

    6. FHA allows seller concessions up to 6% of the purchase price even with only 3.5% down payment, while conventional loans would only allow 3% seller concessions on down payments of 10% or less.

    7. FHA mortgage insurance is much more affordable than conventional private mortgage insurance for borrowers with less than excellent credit scores.

    8. FHA interest rates are generally lower than mortgage rates on conventional loan given the same credit scores.

 

What are The Advantages of VA Mortgages?

 

The VA Home Loan is the most powerful home buying tool in the industry. The GI Bill reshaped post-War America, and the VA Loan Guaranty Program has surged since the housing crash. VA Mortgages help Service members, Veterans, and eligible surviving spouses become homeowners. As part of our mission at Mortgage 1 and our most rewarding, we are pleased to announce we are one of the top two lenders in our home market in 2016.  VA guarantees a portion of the loan, enabling Mortgage 1 Inc. to provide more favorable terms.

VA Loan  Advantages

    Primary Residence Only

    NO Mortgage Insurance

    Max Loan Amount: $424,100 (Up in 2017)

    FICO 620+

    Mortgage can be Assumable for Other Veterans

    Flexible Down Payment Options.

 

The Streamlined 203(k) Program

FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

 

Purchase Loan & Cash-Out Refinance: VA loans are obtained through a lender of your choice once you obtain a Certificate of Eligibility. You can obtain a COE through eBenefits, by mail, and often through your  lender.

 

Adapted Housing Grants: You can apply for an SAH or SHA grant by either downloading or completing VA Form 26-4555 (PDF) and submitting it to your nearest Regional Loan Center, or completing the online application.

 

What Seller Contributions are allowed under the VA program? 100% of Closing costs and up to 4% on

 

The Advantages of Conventional Financing

While all the other programs may get more press, the more strict requirements for conventional loans can give the conventional buyers a head start over other buyers with lesser qualifications. Homeowners with good credit and money for a larger down payment could avoid paying upfront mortgage insurance or monthly mortgage insurance like an FHA loan. There are several reasons why a Conventional Loan could be the best option for your next home.

 

Faster Loan Underwriting  – Conventional loans can require less paperwork and can be obtained more quickly than government-insured loans. Mortgage lenders can approve the loan, without typical delays from FHA or another government agency. The seller will not face an exhaustive FHA inspection which could require time-consuming repairs.

 

More options – conventional loans come in all different types and sizes want a 10 year fixed? Looking for an adjustable 7-year term than conventional is the only place to find it.

 

Optional Escrow Accounts – a conventional loan also usually offer an option to pay taxes and insurance directly, without adding them to the monthly payment through an escrow account.

Security

Conventional mortgages are usually fixed-rate products, meaning that once an interest rate is “lock in” the borrower will keep that same payment for the life of the loan. Borrower’s payments stay the same month to month, whether interest rates climb or housing prices fall. Even if interest rates fall far enough to make refinancing tempting, borrowers have the flexibility with a conventional mortgage because they have already met the tough requirements to get the mortgage.

Advantages

 

• Mortgage Insurance not required if 80% Loan to value or less

• Cancel existing mortgage insurance at 80% LTV

• Can be used on all property types

• More loan program options

• Can hold numerous conventional loans

• No maximum loan limit

 

Disadvantages

 

• Higher down payment requirements

• Higher credit score requirements

• Maybe more difficult to qualify than FHA loan

• Mortgage insurance still required for loans above 80% loan to value

 

When is a Jumbo Loan Required?

A Jumbo Mortgage is required when the loan amount exceeds the current conforming loan limits. As of 2017, the highest conforming loan amount (set annually by the Federal Housing Finance Agency (FHFA)) can vary by county, In Michigan, Florida, Ohio, and Texas it is $424,100. In California, the limits go as high as $636150. Any loan amount above the limit set by FHFA is normally called a Jumbo Loan.

 

Unlike loans that have the terms dictated by the government, Jumbo loan limits are determined by Mortgage 1 underwriters. The variations on jumbo loans can be substantial when compared to conventional lending.

 

Many borrowers at this level can have complicated income situations, including self-employment and substantial investment income.  Conventional lending normally will require more paperwork with borrowers that have that type of income. Jumbo loans can be less cumbersome from a paperwork perspective.  It is not uncommon for multiple appraisals to be needed when the purchase price is seven figures. Two appraisals are often required when the home purchase a home that is more than $1 million.

 

How do the loan rates compare to conventional mortgage rates?

 

Jumbo mortgage rates are very similar to conventional 30-year fixed rates. As with all lending, the interest rate the consumer pays has more to do with the strength of the borrower’s financial profile.  There are several components lenders pay close attention to when evaluating a jumbo mortgage application.

 

Jumbo loan applicants should have great credit and a score above 720, and a low debt-to-income ratio preferably less than 40%. Jumbo applicants typically have significant reserves and liquid assets. If the Jumbo borrower has other investments or properties, the lender will want to evaluate any monthly payments on those types of investments, as well.

 

What is jumbo loan down payment requirements? How are they different from regular loans?

 

Most jumbo loans require 20% down for primary residences, some programs can require less than that depending on other factors.

 

 

 

5 Ways Borrowers Impact Their Interest Rates.

1. Credit Score

More than any other factor, borrowers credit scores have the most significant influence on all types of borrowing. Mortgage rates vary considerably inbetween credit scores of below 640 and above 740.  Borrowers credit scores predict how likely borrowers will pay the mortgage loan on time. Borrowers have many credit scores and they should remember that the scoring model used by the Mortgage industry is specific to housing.  The score they bought online will not be the same score that the lender uses.

 

2. Loan Amount

Borrowers pay a higher interest rate on loans if the loan amount is particularly small or very large loan. When borrowers apply for a smaller loan, the costs can make up a larger percentage of the total costs. To offset those cost sometimes the lender will have to charge a slightly higher interest rate for very small loans. When the loan amount gets very large the risk factors increase along with the interest rate.

 

3. Down Payment

The value of the home and the amount a borrower puts down can impact the interest rate. In general, a higher down payment means a lower risk and interest rates. Borrowers should strive to put down at least 20 percent if you want to get lower interest rates.

 

4. Loan Term

The term of the loan is how long the loan is for. Shorter terms normally have lower interest rates and lower overall costs, but will have higher monthly payments. If you can afford slightly higher payments shorter terms will reduce your costs of interest rates. Discuss what term is best for you with a Mortgage 1 Loan officer for your exact situation.

 

5. Loan Type

There are several broad categories of loans, known as conventional, FHA, and VA loans. Rates can be significantly different depending on what type of loan borrowers choose.