While looking for the best mortgage make sure you shop, compare and negotiate. In doing so, it will help you get the best financing deal. Whether its a home you are purchasing or refinancing or even a line of credit ( home equity loan) it's a product and shopping and negotiating may often save you thousands of dollars.
There are several types of loans available. Any mortgage loan other than a FHA, VA or RHA loan is a conventional loan. FHA loans is part of the U.S. Department of Housing (HUD). They require a lower down payment and are easier to qualify for than conventional loans. They assist first time homebuyers and others that may not be able to meet down payment requirements. Any one can be approved as long as they have a satisfactory credit record, enough cash to close the loan and enough steady income to make monthly mortgage payments. In order to get FHA insured loans, you need to apply to a HUD approved lender. VA loans are guaranteed by the U.S. Dept. of Veterans Affairs. This type of loan allows veterans and service people to obtain home loans with good loan terms and usually without a down payment. It's easier to qualify for a VA loan than a conventional loan. Understand that the U.S. Dept. of Veterans Affairs don't make the loans, rather they guarantee the loans made by the lenders. VA determines your eligibility. RHA (The Rural Housing Service) of the USDA ( U.S. Dept. of Agriculture) guarantees loans for rural residents with minimal closing costs and no down payments. Conventional loans refer to a mortgage loan that follows government sponsored enterprises like Fannie Mae and Freddie Mac. These loans are either conforming or non-conforming. Conforming simply means they follow the terms and conditions set by Fannie Mae and Freddie Mac. Non-conforming means they don't meet their guidelines. This program looks at your income and monthly expenses. Debt to income ration. Your credit history and overall pattern rather than your individual issues you may have had. Typically conventional loans require the homebuyer to invest at least 5%-20% of the sales price in cash for a down payment and closing costs. Conventional programs offer different loans as well. Fixed rate loans which means the interest rate stays the same for the entire loan period. This is helpful because you know how much your monthly payment will be. The other loan is Adjustable rate mortgage (ARM). This means that the initial interest rate and monthly payments are low but can change during the life of the loan. Conventional ARMS are offered with initial fixed rate periods of 3,5,7 and 10 years.
There are many different financing options available which makes it easier for potential home buyers to own that home they've always wanted. Just remember, to shop, compare and negotiate!
-Robyn Fitzgerald