Purchasing a home is on average the largest transaction a person will ever make in their lifetime.  It is important to know how to make the most of your principal to limit that expensive overwhelming feeling when you decide on a home.  Knowing mortgages can steer you in directions you never knew were possible.

FHA Loan:

Can be used once and allows you to borrow up to 96.5% of a property à The down payment is only 3.5% of the property’s selling price.

Only need a credit score of 580 to qualify for the loan, however if your score is between 500 and 579, you can still get the loan however the down payment will be 10%.   In addition, a maximum debt-to- income ratio for the loan is 50%.

The usual down payment requirement on a conventional mortgage is around 20%, meaning the FHA loan allows for much less required capital, additionally the mortgage will be insured by the government, minimizing the risk that comes with purchasing a home.

VA Loan:

For those who have served for our nation, the VA Loan requires no down payment, unlike any other loan.  Veterans can use it when purchasing a primary residence, or they can use it when refinancing an existing mortgage.

You may say, “But won’t the monthly mortgage payment be insane?” Potentially yes, but the VA Loan is guaranteed by the government, substantially lowering the risk of utilizing the loan, somewhat of a thank you to all that have chosen to protect our country.

Conventional Loan:

Need a credit score of at least 620, a higher score can yield a lower required down payment.

A debt-to-income ratio that is below 44% is also recommended for the average conventional mortgage, but can be negotiated.  A debt-to-income ratio is the amount of money you spend in bills every month (student loans, car payments, etc.) divided by your monthly income before taxes.  Someone that pays $727 in monthly bills and receives $1,936 in income a month has a debt to income ratio of 37.5%

There are many variations to the conventional mortgage, but the numbers we have provided are a generalized offer.

Example:

A house costing $350,000:

Normal down payment of 20%: $70,000

Credit score under 580 (10%): $35,000

Credit score over 580 (3.5%): $12,250

By utilizing the FHA loan, you can save $57,750 upfront, and have a mortgage that is insured by the government!

We have attached a loan calculator where you can enter many different numbers to gauge what kind of loan you might offer.

No two mortgages are the same, so it is imperative to not compare yourself to others.  Every loan is different, every banker is different, and every home is different.  It is important to ensure you work with the right broker that understands all your desires and limitations, perhaps one from Vision Alliance!