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Home Loans for Beginners 101

Home Loans for Beginners 101

Today we’re going to cover the most common kinds of home loans that are used today. Depending upon your financial situation, your income, your credit score, the kind of house you’re buying, how much money you need to borrow, how much down payment money you have, the price of the home and the taxes on the home will determine which mortgage would work best for you and your situation.

First, we have FHA financing. These are run by the Federal Housing Administration. There are tons of advantages of getting an FHA loan. First off, there’s a low down payment; you can go in with only a three and a half percent down payment. Then, they’re a little bit more lenient with credit scores. With other financing, you must have a 640 credit score to be able to qualify. With FHA, some companies will finance you with a 620 credit score, some 600, and now there are some that will finance you with as low as a 580 credit score you may need to shop around, but they do exist. I’ve just found one that will do a 560! You can find these. You can get FHA financing not only for home purchase, but also for home renovation, which is another bonus. They usually run 30 year fixed rate, you can also get 15 year.

Then we have conventional mortgages. Those are run by Fannie Mae and Freddie Mac. You need to have good credit, 640 minimum, but you have more financing options available to you. There are terms for 10 to 30 years, and you can get them for home purchase and renovation and home refinancing. Not for the faint of heart, but if you’re feeling lucky, you can also get 5, 7, 10 year adjustable rate. The only disadvantage is that with interest rates so low, your payments can only go up. It’s a scary thought, lol!

Then we have USDA Rural Housing loans. There’s a few different ways that the USDA goes when it comes to mortgages.You can get in with zero money down, because they will roll your down payment into the total mortgageprice. All you need to have is closing costs. Think about it, that’s 3.5% of the purchase price (for your down payment) that you’ll now have left in your bank account to put towards closing costs! Awesome for people looking to buy with no cash out of pocket. They have a specific criteria that you need to meet, you need a good credit score, about 620 to 640. The only disadvantage is that you’re limited to certain areas thay qualify. There’s actually a population maximim number that considers a town to be rural to qualify. You can go to the USDA website and check it out here: http://www.rurdev.usda.gov/hsf_sfh.html. These loans are good for single-family homes and condominiums. There are a number of loan financing programs that they have, go through their website and call the office most local to your area. You can check to see if the home you want to buy is in an eligible area, and you can also check to see if YOU meet the criteria, as a buyer, on the website.

Then, last but not least, we have VA loans. Those are run by the United States Department of Veterans Affairs. These are awesome for veterans. There are 0 money down payments, you can get super low payments and there is no PMI. You can use these to buy a home or refinance a home mortgage. Some mortgages are assumable. That means that you, the home purchaser, can assume the payments that are left on the owners mortgage, as long as the lender agrees to it. That could save you a TON of money on a house! Of course, these are limited to eligible veterans.

So there you have it. Those are the most popular and common mortgage options that you will more than likely face when you go to buy your home. Check with your mortgage lender for the best possible way to go for your circumstances. So many options, and low interest rates, there’s never been a better time to buy!

~Christine Gerbehy

About the Author: Christine Gerbehy is a Realtor for Berkshire Hathaway Fox & Roach Realtors in Northfield, NJ. and is e-Pro certified. Realtor, writer, blogger, wife, mother and zookeeper, I LOVE what I do. ALL of it. Let me help you to buy or sell your property, ’cause This Mama Sells Real Estate!

Need to see some MLS listings?  You can use mine! Just go to http://www.buynjshorehome.com/ and click on “search homes.”

Logo of the Federal Housing Administration.
Logo of the Federal Housing Administration. (Photo credit: Wikipedia)