4 low-cost mortgages that will help you achieve the American Dream | RNL Blog

There are many myths and misconceptions about buying a home abroad. pop civilization doesn't always inform us the truth about the mortgage approach, and not everyone accepts a "single family house with a white picket fence" on a product. 20% down payment and use of a conventional mortgage.





Tu discussed four different types of mortgages that have lower initial costs to the borrower and thus can make it easier for the average American to buy a home.


To be clear, if you can make a 20% down payment on a home, you'll be able to avoid paying for additional mortgage insurance that can add hundreds of dollars to your monthly mortgage payments.


And unlike, say, homeowners insurance, this type of insurance (called MIP on an FHA loan or PMI on a conventional loan) only benefits the lender because it takes on more risk by lending you more than 80% of the cost. Buying a home.


However, if you live in a high-cost area or don't have a high salary (or both), keep reading to learn about four types of mortgages that can help you, as saving up to the 20% max payment can be challenging. on the house. Being available to you and for less money.




1. FHA


An FHA loan can be a great step for first-time homebuyers, as it's a product created specifically by the federal government to help more people buy homes.


Traditional mortgage lenders, such as banks, offer FHA mortgages, and then that government agency guarantees the loans by compensating the lender if you don't pay back your loan. This means that FHAs are available with a 3.5% down payment for people with lower FICO credit scores (as low as 580 for 3.5%; if you have a credit score between 500 and 580, you'll need a 10% deductible payment).


FHA loans have the privilege of paying a mortgage insurance premium (MIP) for the life of the loan, but you can eliminate the additional costs if you refinance with a conventional mortgage once you reach 20% equity.




2- Traditional 97


97 Conventional is a conventional mortgage with a 3% down payment, which means you'll finance 97% of your home purchase. However, you will need to pay Private Mortgage Insurance (PMI) until you reach 20% of the equity.


Unlike an FHA, the credit score requirements will be more stringent if you expect to get a traditional mortgage with only a 3% discount.


The minimum FICO score for a conventional loan is usually 620, but you'll likely need a score in the 70s or better to qualify for a better interest rate. So if you don't have a solid down payment but really good credit, a conventional 97 mortgage could be the loan for you.




3. US Department of Agriculture


If you are looking to buy a home in a favorable rural or suburban area of ​​the country and are considered low-income, you may consider a USDA loan.


Provided by mortgage lenders and guaranteed by the USDA. USDA loans actually don't have any down payment requirements, but the borrowers' income must be less than a certain percentage of the median income in their area.


The home purchased must also be the buyer's primary residence and have a reasonable credit score as determined by the lender, who will also consider a debt-to-income ratio and other financial factors in order to approve or deny a home loan application. USDA loan.




4.VA


Finally, if you are looking to buy a home and are a veteran or active military, you may qualify for a VA loan.


Like USDA loans, VA loans don't require a down payment (there will be a financing fee equal to a percentage of the purchase price of your home, less if you can make some down payment, so just because it's not necessary doesn't mean it's not a good idea anyway) .


VA loans have some great features; The surviving spouses can qualify for them and you can use the mortgage program over and over again.



If you're worried that home ownership is out of reach for you because it's hard to save up for a down payment, don't despair. Research your options, which may include some or all of the above types of mortgage loans that don't require any strict down payment requirements.

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