Types of Loans -FHA Loan
|FHA Loan (Federal Housing Administration Government Loan)|
--3.5% down payment based on sales price
--Down payment can be gift from relatives (no expectation of repayment)
--Qualifying ratios: 29% (house) and 41% (house and all credit debt).
Example: If you make $1,000 before taxes (gross income), your maximum house
payment can be $290 (29%) per month, with your maximum house payment plus other
credit debt payments not exceeding $410 (41%) per month.
|--Upfront and monthly mortgage insurance|
--Easiest loan for buyers to obtain (not as credit-sensitive/allows for higher debt-to-income ratios).
|VA Loan (Veteran's Administration Government Loan)|
--Must be active or retired military
--No down payment required--100% financing.
--Qualifying ratios: 41% (house or house/credit debt).
--No upfront or monthly mortgage insurance.
--VA funding fee--may be financed into loan or paid at closing.
--Less than 10% of veterans have VA loans (U.S. Dept. of Veterans Affairs, 2009).
--Must be married to count both buyers' incomes (not the case with FHA & Conventional loans).
|Conventional Loan (Non-government Loan)|
--5% down payment
--Qualifying ratios: 28% (house) and 36% (house and all credit debt).
--No upfront mortgage insurance.
--No monthly mortgage insurance with 20% down payment
|General Financing Information:|
--Get prequalified with a mortgage lender before starting your home search.
--Loan qualifying is based on gross monthly income (before taxes).
--Factors that affect qualifying for a mortgage loan:
--CREDIT--biggest factor in approval
--Rent history/mortgage history
--Expenses not counted against buyer when qualifying for a mortgage loan:
--Insurance--car, health, renter's
--Food (unless aid for with a credit card)
--Hold off on major purchases--car, furniture, vacation, jewelry--until after
closing on your home.
--PITI--principal, interest, taxes, interest=house payment
|Three Financial Responsibilities for Home Buyers:|
1. Down payment--can range from $0 to 5% of sales price, depending on type of loan. This amount is paid at closing.
2. Closing costs--fees charged by lender and title company.
3. Prepaids--money for these items is collected at closing.
--Homeowner's insurance (14 months)
--Property taxes--3-12 months depending on month you close
--Interest--paid from day of closing to the end of the month