Do you know the difference between mortgage programs?
There are a variety of different loan programs that you can utilize for purchasing either your first home or new home. This article will go over some different options you could use, as well as how you could use them.
The United States Department of Agriculture offers assistance in purchasing homes in rural areas away from cities. To qualify, your household income will need to meet a specific threshold, and the home you’re purchasing will need to qualify in a rural area, as defined by the USDA. They offer a great way for modern Americans to get on the property ladder at any time in their life.
FHA loans are loans that are insured through the Federal Housing Administration. They are beneficial as they allow down payments to be accepted as low as 3.5%. These are often used by buyers with lower credit scores or a lack of savings. Many first-time buyers use this loan when purchasing their first home. Lenders can offer these lower-priced mortgages because they are insured by the FHA who insure lenders via protection for loss of earnings.
It won’t be every lender that can offer an FHA loan, as the lender will need to be approved by the administration. An FHA loan can be used for either home purchase needs, or to refinance a current home. You can get specific FHA loans for new construction or renovation needs in some cases.
VA loans can be used much for the same purpose as FHA loans, but with a key difference. These loans are only available to those who have served within the military. They are insured against the Department of Veteran Affairs, much like how the Federal Housing Administration insures their lenders for more generous loan programs. The key difference; you will not pay any down payment on a VA home purchase.
Similar to an FHA loan, these loans will have lower credit score demands, as well as offering fairer interest rates. VA loan vs FHA loan will be a decision you have to make depending on your criteria, and what you’re looking for in a loan. VA loans will be restricted to those who are veterans who have been honorably discharged from the line of duty, whereas FHA loans will cost more, but more people are eligible.
Jumbo loans are loans that an individual can take out to afford luxurious properties. The minimum requirement will be anywhere from a few hundred thousand, to a couple of million dollars. To qualify for a jumbo loan, you need to have a higher credit score in comparison to the other loans mentioned.
The interest rates are also likely to be much higher here, to help cover the risk of the lender. You can use these loans on foreclosed properties if you so wish. It proved difficult to get a jumbo mortgage during the pandemic, but it is now starting to return to pre-lockdown levels.