A VA loan is a mortgage loan available through a program established by the United States Department of Veterans Affairs. VA loans assist service members, veterans and eligible surviving spouses to become homeowners offering up to 100% financing on the value of a home. Your length of service or service commitment, duty status and character of service determine your eligibility for specific home loan benefits. Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee, but no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies based on the type of loan and your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time. In some cases, the funding fee is exempt.
A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by a government entity, such as the Federal Housing Administration (FHA), the U. S. Department of Veterans Affairs (VA) or the USDA Rural Housing Service, but instead is available through or guaranteed by a private lender (banks, credit unions, mortgage companies) or the two government-sponsored enterprises, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The minimum down payment is 5%. There are some other programs that will allow a 3% down payment if the borrower and property can qualify. Private Mortgage Insurance (PMI) is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home’s purchase price. PMI is paid monthly and added to your mortgage payment.
The USDA loan offers a no down payment mortgage option that is available to a large portion of the United States. USDA loans are made by private lenders and guaranteed by the U.S. Department of Agriculture (USDA). They are offered to home buyers in less industrialized areas as a way to boost homeownership in rural areas. You can purchase with a USDA loan only in a qualified rural area. It must be used for a primary residence (where you live all the time) only. USDA will consider your household income when evaluating your eligibility. USDA requires an upfront guarantee fee and a monthly fee. The upfront fee can be added to your mortgage.
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). FHA loans require a lower minimum down payment (3.5%) and credit scores than many conventional loans. Your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance. FHA guarantees the loan. You pay for that guarantee through mortgage insurance premium payments to the FHA. An FHA loan requires that you pay two types of mortgage insurance premiums – an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP (charged monthly). You will make Annual MIP payments for either 11 years or the life of the loan, depending on the length of the loan and the loan to value. The property being financed must be your primary residence. This loan program cannot be used for investment or rental properties. Detached and semi-detached houses, townhouses, row houses and condos within FHA-approved condo projects are all eligible for FHA financing.
HomeStyle Loan is a long-term renovation loan backed by Fannie Mae and available to owner-occupied homeowners as well as small buy-and-hold investors. It allows you to finance improvements, renovations or repairs to a home at the time of purchase or as a refinance transaction—up to 75% of the as-completed appraised value of the property. If you’re a first-time homebuyer or combining HomeStyle Renovation with a HomeReady mortgage, your down payment can be as low as 3%. You can also take advantage of cancellable mortgage insurance and today’s competitive interest rates, which may be lower than a home equity line of credit or personal loan.
HomeReady mortgages are a line of conventional home loans offered by Fannie Mae that are meant to help low- and moderate-income borrowers buy or refinance. HomeReady loans reduce the typical down payment and mortgage insurance requirements, but they're also more flexible about allowing contributions from other people. Borrower is not required to be first time home buyer. Low down payment; as little as 3% down for home purchases. Flexible sources of funds with no minimum contribution from borrower’s own funds. Non-occupant borrowers permitted. Cancellable mortgage insurance (restrictions apply). Reduced MI coverage requirement for loan-to-value ratios above 90% (up to 97%) • Pricing is better than or equal to Fannie Mae’s standard loan pricing (risk-based pricing waivers for LTV ratios > 80% with a credit score ≥ 680
In addition to its down payment requirement of as little as 3%, Home Possible now offers more options to responsibly increase homeownership for more of your borrowers. Co-borrowers who do not live in the home can be included for a borrower’s one-unit residence, borrowers are permitted to have another financed property, and more –all with competitive pricing and the ease of a conventional mortgage. The Home Possible mortgage is available to all qualified borrowers whose income does not exceed 100% of area median income (AMI), except in low-income census tracts, where there is no income limit. Non-occupying borrowers are permitted on one-unit properties that meet ratio requirements. However, at least one borrower must occupy the property as their primary residence.
Offers Borrowers Rate Protection While Shopping for a New Home. Available with 60 or 90 day lock periods.* Eligible with all conventional and government products except for High Balance, Jumbo or Non-QM. Property must be identified at least 30 days prior to lock expiration.** When rates are on the move, this special program enables borrower to lock a rate for 90 days while searching for their new home. If rates rise, rate is protected.
The Mortgage Credit Certificate (MCC) reduces the amount of federal income tax the borrower must pay, which in turn, frees up income to qualify for a mortgage. Every homebuyer can claim an itemized federal income tax deduction for the mortgage interest paid each year on a mortgage loan. The MCC allows the borrower to take a tax credit equal to 40% of the annual interest paid on the mortgage loan. The remaining (60%) of the mortgage interest will continue to qualify as an itemized tax deduction. The specific dollar amount of the tax credit depends on how much interest the borrower pays on a mortgage loan. The amount of the credit cannot be more than their annual federal income tax liability after all other credits and deductions have been taken into account. In no case can the tax credit exceed $2,000 per year. To receive an immediate benefit from the MCC, the borrower must file a revised W-4 withholding form with their employer, which should reduce their yearly tax contribution and increase the borrower’s take-home pay.
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