7 Basic Purchase Loan Programs Every First-time Homebuyer Needs to Know

Wondering how to buy your first home despite not having the purchase price in full? With the many available home loans nowadays, you can now own your home at an affordable price. Most media outlets make a home purchase such a tricky deal, but it doesn’t have to be if you have a good mortgage lender to help you make your dream home a reality.

Here are seven basic Purchase Loan Programs every first-time home buyer needs to know before applying for Mortgage Loans Dallas.

Conforming Loans

This is the type of conventional loans that meet the Freddie Mac (FHLMC) and Fannie Mae’s (FNMA) criteria for bank-funding which are government-sponsored enterprises. It usually offers lower down payment fees and much lower interest rate. As of 2018, the loan size one can get generally limited to $453,100 for high-cost areas.

Non-Conforming Loans

This mortgage loan type no longer meets the criteria set by government-sponsored enterprises such as Freddie Mac (FHLMC) and Fannie Mae’s (FNMA) criteria for bank-funding. The usual down payment required is 20% or more and has a higher interest rate since lenders are more at risk with the higher loan amount (above $729,750) they give to homebuyers.

Conventional Loans

These are mortgage loans that still meets the criteria set by FHLMC and FNMA but are no longer insured by the government. It can either be conforming or non-conforming loans, and are among the first traditional home loans made available by banks and lenders.

FHA Mortgage Loans

FHA stands for Federal Housing Administration. This means it offers home mortgage insurance, protecting the lender by minimizing financial risks. FHA Loans offers a small down payment fee for as low as 3.5% depending on the purchase price, allowing greater flexibility when it comes to calculating your total income and payment ratios. There are usually no minimum credit score requirements when it comes to FHA loan.

Non-Qualified Loans

Also known as Non-QMs, they have entirely different criteria from government-sponsored enterprises. This is a kind of mortgage loan where one doesn’t need to meet the strict guidelines just to afford a loan.

USDA Mortgage Loans

The US Department of Agriculture guarantees USDA Mortgage Loans. This mortgage loan type helps low to moderate-income individuals in Texas own home by providing 100% financing option. Many prefer this type of mortgage loan because or low or no down payment fees, the absence of mortgage insurance and the minimal closing fees. There are two types of USDA Loans – the USDA DIrect who caters to individuals with a maximum income of 80% AMI and the USDA Guaranteed which provides individuals who make more than 80% to 115% AMI.

Good Read: Learn About The USDA Rural Mortgage Loan Basics

VA Mortgage Loans

This mortgage home loan type caters to individuals and their eligible spouses who used to serve in the military. It offers 100% loan for people who are American Veterans. One only needs to issue a COE to their mortgage lender, and once approved, the US Department of Veterans Affairs will guarantee the loan. An AV can borrow up to 100% of their home’s purchase price or the reasonable price (whichever one is a lesser amount). Now that you know of the different purchase loan programs available, you can ask your trusted lender to explore your options. Don’t hesitate to ask any questions, and you’ll soon find the loan option that will best fit your needs and budget.

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