If you are financing the purchase of your home, there are a number of options available that generally fall into two groups:
1) Government backed like VA or FHA loans or 2) Privately Held such as Conventional and Jumbo loans. If you have or are now serving in the US Military, you will likely be eligible to obtain a VA loan, which rank among the lowest interest rates available at any given time! The other financing options allow you to optimize your interest rate based on your credit worthiness, as well as the maximum loan amount you will be requesting. Please keep in mind that these are only the most common types of loans and the information we are covering here is not designed to be financial or legal advice, please speak with a licensed loan professional, attorney or accountant for specific questions.
Similarities between the loan types are 1) the need for a down payment, 2) good credit, 3) employment or financial ability to pay back the loan. Additionally there are fees paid to the lending institution to create the loan called an originating fee as well as interest and the requirement to repay for the loan. Sometimes there are Grants available for some Government backed loans, designed to help get you into your own home.
Government Backed Home loans
VA or Veterans Administration:
If you served our country in any of the various military services, including the National Guard, you may have earned an entitlement for benefits like a Government backed VA loan. To learn more about your eligibility status, please visit the VA website where you can apply online and find the status of your eBenefits. ( link https://www.va.gov/housing-assistance/home-loans/eligibility/ ). One of the biggest advantages to a VA loan is the $1 down payment, which removes the biggest obstacle to home ownership for most buyers. Depending on your location there is a maximum amount you can borrow, but many Veterans buy a home well in excess of this limit.
$1 down payment
Reduced processing fees for veterans with disabilities
No limit to the price of the home
Generally the lowest interest rate available
Lower credit worthiness requirements
Maximum loan amount based on your location
Required pest inspection
The Federal Housing Administration is designed to help buyers who don’t qualify for a conventional or VA loan to become home owners. Often times there are grants to help buyers with down payments or upfront expenses of a loan. Some of these grants are forgiven after a perfect payment history and a certain amount of time in the home. To find out about current grants in your area, speak with a loan officer or visit the FHA website ( link https://www.fha.com/fha-downpayment-grants ). Generally a 3-3.5% down payment is required.
Lower credit requirements
Possible grants available
Maximum loan amount
Currently mortgage insurance is for the life of the loan
Usually a higher rate than a conventional loan
You must occupy the home as a primary residence
Privately Insured Loans
If you have worked hard to keep your credit rating in good to excellent status, a Conventional loan allows you to shop lenders to find the best interest rate. Additionally, if you have 20% of the purchase price for a down payment, you can avoid mortgage insurance from the very start of your loan saving up to hundreds of dollars every month! Some larger lenders administer the loan for the life of the term, whereas others may resell your loan, changing the place you send your payment. Loans must conform to certain standards not only on credit worthiness, but also on maximum loan amounts. A Conventional loan can be at a fixed or adjustable rate. Currently interest rates are near the lowest rates in our history. Keep that in mind if you’re considering an adjustable rate, which might be better if you plan to be in the home for a shorter term. Typical minimum down payments can be as low as 3%
of the purchase price.
Lower interest rates
Ability to avoid Mortgage Protection Insurance
Higher loan limitations
Maximum loan amount
Your loan can be sold to a different institution without your consent
You must have good to excellent credit
Jumbo or Nonconforming:
If you’er looking at a more expensive home, past the loan maximums of other loans, you will be looking for a Jumbo or Nonconforming loan. A Jumbo loan is the largest home loan usually available and would be used for the highest end of the real estate market. Borrowers using a Jumbo loan will need to have higher credit scores and stronger reserves than other loan terms, but they still can offer great rates, comparable to a conventional loan.
Can buy a much more expensive property than with other loans
Competitive interest rates
Higher down payment requirements
Higher credit worthiness is also required
Once again, these are only the most used types of loans that we have gone over, there are many other types available. If you’er in the market for a home and you’d like a referral to the loan officers I’ve worked with in the past, please use the contact form to the right. I’d be happy to forward you a list of the lending partners I recommend in the Las Vegas area.