Unless you’re planning on buying a house with all cash, and a lot of people do, chances are you’re going to need financing in some form or fashion. There are a lot of different options and ways to get financing so let’s discuss some of the options, financing requirements, and where you can get a home loan.
Lenders typically look at your credit history, credit score, debt to income ratio, and how long you have had the same job to determine your eligibility for certain loan programs. The higher your credit score and the better your credit history, the more favorable the terms. But even if you have poor credit, it doesn’t mean that you won’t qualify for a home loan. There are several options available even with low down payment, down payment assistance programs, and grants.
Most home loans do require a credit score of at least 580. Anything over 720 will offer the best terms, but credit score isn’t everything. Paying your bills on time, eliminating any delinquent accounts, and not having a high debt to income ratio all factor into the terms and interest rate for a home loan. If you don’t currently qualify for a home loan, lenders may offer tips and suggestions on how to get to where you need to be within a certain timeframe.
There are several different options to choose from when financing a home:
Conventional loan – This is the most common and traditionally works when there is a higher down payment such as equity from an existing home. Interest rates tend to be lower and terms more favorable but down payments need to be at least 10% to 20%.
FHA loan – This is a low down payment option with about a 3.5% requirement that can be built in with loan assistance programs. This might have a little higher interest rates but more favorable terms for first-time homebuyers. Mortgage insurance may be required.
USDA loan – This is a zero down home loan only available for certain rural areas and certain types of homes. This might be a good option depending on the home you choose.
VA loan – This is reserved for military personnel and their family and typically requires a zero to low down payment option where sellers pay closing costs.
Owner financing – While unusual, owners may be able to finance their own loan by offering higher interest rates to those that may not qualify for traditional financing methods.
Where to get a home loan.
Banks – Anyone can walk into a bank and apply for a home loan. Banks may offer more favorable terms but may also be limited in what they can offer since their lender options are also limited.
Credit Unions – A credit union is also like a bank and that they can offer more favorable terms but limited options.
Mortgage Advisor – Also called a mortgage officer, these individuals can obtain financing from a variety of different sources, lenders, and banks across the country and maybe more expensive upfront book and typically offer lower interest rates and better terms.
Contact us at any time for referrals and references to home loan professionals in our area or to get started on the preapproval process.