The Most Common Home Loan Programs
There are many home loan programs available for buying Columbus OH homes for sale. They generally fall into one of two categories: government insured and conventional. As you get ready to buy a Columbus condos or homes, it is important that you become familiar with the most common home loan programs. Here’s basic information about them.
The FHA (Federal Housing Administration) is the world’s largest insurer of home mortgages. They don’t actually provide the loan. They guarantee your lender that the institution will not lose money if you default on your mortgage payment.
The FHA’s mission is to help “borrowers get amounts they qualify for.” As you might expect with a federal agency, the FHA has many guidelines for determining who qualifies for a loan, and these guidelines differ from state to state. The two most important indicators the FHA will use for qualification are a borrower’s debt ratio and credit history.
Your debt ratio compares your monthly income to your monthly debt payment. This will determine how much money you can comfortably afford each month to repay all of your debts, including a mortgage. Calculating your debt ratio helps to prevent you from buying a home you can’t afford.
For FHA loans, you may be able to use an alternative credit history. More information about FHA loans is available at www.fha.com.
If you’re a veteran or the spouse of a vet who was killed in the line of duty, you may be eligible for a Veteran’s Administration (VA) Loan. As with FHA Loans, a VA Loan is actually a guarantee to the lender, rather than a loan to you. Some of the benefits of VA Loans are that they usually don’t require any down payment and frequently offer lower interest rates than other types of loans. You can find out more information by visiting www.valoans.com.
USDA Home Loans
The United States Department of Agriculture (USDA) offers programs similar to the FHA and VA, with the exception that the USDA’s home loans are specifically for residents of rural areas. The USDA generally defines a “rural” area as open country, places with a population of 10,000 or less, and some towns and cities with populations up to 25,000 residents. Pretty much everything outside of Franklin and Delaware County qualifies. The USDA tends to be a little more lenient in terms of credit score. More information at http://www.rurdev.usda.gov/
Conventional loans are any loans that are not insured or guaranteed by the Federal Government. Since the lender takes on the risk of the loan, there are definite advantages and disadvantages to conventional loans. They may have stricter lending rules and require larger down payments. Typically, the down payment is determined by your credit score. Usually, a 20% down payment is required for a conventional loan, but it may go as low as 5% if you have a high credit score.
Interest fees may be higher than FHA or VA loans, and conventional lenders may assess other loan or application fees. Furthermore, if the lender makes the loan with the intention of later selling it to a secondary market, it may impose additional restrictions.
It’s important to talk with your Columbus real estate agent or your loan officer to discuss your loan options and figure out which one is best for you.
Call Susanne today at 614-975-9650 if you have any questions about getting a mortgage loan!