The answer to that question can be uncovered in many ways. But the main three categories that will help you determine this are your credit scores, debt to income ratio, and funds available for down payment/closing.
There are various types of loan programs to choose from and in a lot of cases, a borrower will qualify for more than one program. The four main programs that borrowers will fall into are Conventional, FHA, VA and USDA. Let’s touch on the highlights of each of these.
Conventional – This program requires a little bit better credit score than the other three programs. The minimum down payment is typically 5% of the sales price. But in some case, it can be as low as 3%. One of the main benefits to the conventional loan program is that it does not require a funding fee to be added on top of the base loan amount. Each of the other programs require a funding fee to be added, which has the borrower financing more over the life of the loan. The ability to have the mortgage insurance removed from the monthly payment is also an easier task than with the other programs. The conventional program is also what is utilized on the higher sales price (Jumbo) loans. These are loan amounts greater than $424,100.
FHA – This is the most lenient of the programs when it comes to credit and ratios. Typically a borrower will bring less money to the closing table with an FHA loan versus a conventional loan. Even with the funding fee that is added onto the base loan amount, many borrowers find that the FHA loan is a viable option than going with the conventional loan. This program is also where a borrower would utilize any eligible down payment assistance program. Again, some borrowers will need to go with the FHA loan due to it allowing a lower credit score and/or higher debt to income ratios.
VA – For the veteran who qualifies, this is the best loan program out there. This is a 100% financing loan with No Mortgage Insurance required. Mortgage insurance protects the lender from default of the borrower making the monthly payments. The VA loan does not require this to be paid by the homeowner. VA also only has one qualifying debt to income ratio. So it will allow a borrower to qualify for more home than the other programs in some cases.
USDA – This is a 100% financing loan that is based upon where a property is geographically located. The qualifying areas are in the rural locations of a metropolitan area. The borrower also has to meet certain credit score and household income requirements. This is a great loan for those that qualify and find a home in an eligible location.
These are highlights of the main loan programs that are available. There are other options to explore as well. I will help guide you through the process of choosing the one that is most appropriately suited for you and your family. Contact me directly for more details on getting prequalified for any of these programs.
Tony Brown NMLS #970846 Branch NMLS #164625 Georgia Residential Mortgage Licensee #46959 Branch #40625 MLO TN #128571. Homestar is an Equal Housing Opportunity Lender.