Typical Loans For a Buyer

#1:  Fixed vs. Adjustable Rate

a. Fixed - same interest rate for entire repayment term.  Size of monthly payment will stay same entire term.

b. Adjustable (ARM’s) - interest rate will adjust/change from time to time.  Typically start with lower interest rate but after specified period of time, interest rate will adjust.

#2.  *Government-Insured (3) vs. Conventional Loans (1)

a. Conventional - not insured or guaranteed by Fed. Gov. in any way.  

• • 5-10% down, 25% if investment property.  

  • Much more lax with rules.  

  • Just habitable (heat, hot water, electricity, no holes in roof for ceiling, but CAN have cracked windows).

  • Typically 3% max credit from seller - To get exact number confirm with lender 

b. *FHA (Fed. Housing Admin.) - managed by Dept. of Housing and Urban Development (HUD).  The government insures the lenders against losses that might result from borrower default. 

• • Available to all types of homebuyers, not just 1st timers.

  • Advantage - allows down payment as low as 3.5% of purchase price.

  • Disadvantage - Mortgage Insurance (PMI) will increase size of monthly payments.  Typically .3 to 1.5% of loan amount per year. (this is only required if mortgage is less than 20% equity (less than 20% of a down payment).

  • Typically 6% max credit from seller - To get exact number confirm with lender 

**see government requirements for these loans**

c. *VA Loans:  Military Service Members and families guaranteed by Fed Gov. (Dept. of Veteran Affairs)

• • Advantage - borrowers can receive 100% financing for purchase of home (0% down).

  • Typically 4% max credit from seller - To get exact number confirm with lender 

**see government requirements for these loans**

d. *USDA/RHS Loans:  United States Dept. of Agriculture 

• • Rural borrowers ONLY (only available in certain towns)

  • Rural residents that have steady, low, or modest income and yet unable to obtain adequate housing through conventional financing.

  • Income must be higher than 115% of adjusted area median income (varies by county)

  • 0% down

  • Process apx 1-2 weeks longer (underwriting gets sent OUT-it is NOT done is house. Once sent out, have to wait for it to come back...THEN you can close).  

**see government requirements for these loans**

**Government Requirements:

a. At least 3 years left on roof

b. No chipping or peeling paint

c. No exposed wiring

d. No broken windows

e. Handrails on steps with 3 or more risers (inside or outside)