There are few most common mortgage loans nowadays that buyers avail based on their qualifications and affordability. Be careful in choosing your best options as to your qualifications and what you can truly afford. Most of my potential buyers of course opt for no down payment at all. However; there are certain guidelines and rules that you have to be qualified and limited sales price compared to other types with certain percentage of down payment. You need to balance what is more important to you. The no down payment loans are the following:
VA loan – straightforward loan but you must be a Veteran to be qualified.
VHDA Loan FHA Plus- this is zero down payments technically as no money out of your pocket for the down payment; however the customary 3.5% to 5% down payment will be provided and considered a second loan. The qualification based on credit scores is a little bit higher compared to other types of loan that requires down payment. Caution: This type of loan requires one to six months reserve on your bank accounts in case of loss or job or any other hardship issues in the future. The qualification amount is usually lower than the other types of loans.
You can opt for a new FHA which only requires 1% down payment; could be your own money or a gift from relative. The other 2.5% will be a non-repayable grant by the government unlike the FHA Plus. Your credit score should be at least 620. Again, the qualification amount is usually lower compared to other types of loans.
The traditional FHA loans which requires 3.5% down payment could be your own money or gift from relatives. The above loans are the most popular ones due to no or very low down payment required to get a loan. Some of these maybe limited times only depends on the reserves. Could be first time first serve depends on funds can be exhausted.
Caution: There maybe corresponding PMI (Private Mortgage Insurance) on top of your monthly payment to protect the lender in case of default as the risk is high in lending these types of loan. PMI can be removed once you get at least 20% of equity or if you refinance.
CONVENTIONAL MORTGAGE – this is also one of the most common types because of low interest rates compared to the above mentioned loans. But you have to put in at least 5% or higher for a down payment. There is no PMI also on this type of loan.
Adjustable Rate Mortgage (ARM). I don’t usually recommend this type of loan to my buyers. These have rates that start out lower than the current rates, but can change after one, two, or five years – usually upward!
Adjustable rate loans got many home owners into trouble when their rates went up faster than expected.
There are still a lot out there but these are the most common types of loan typical buyers can be qualified for. It depends on the investors and mortgage companies. They may have programs of their own and have their own guidelines and qualifications. The types I provided are the most common and generic with almost all mortgage companies. I am not a loan officer but these are what we encounter every day. Consult a professional loan officer or mortgage consultant in any of your mortgage needs.
Note: Jocelyn Porteria is a Realtor® licensed in VA. Top Producer of Fairfax Realty and earning Five-Star Reviews on ZILLOW from her clients. She is a Certified Expert Negotiator and also earned a designation as an Accredited Staging Professional; ABR, Accredited Buyer’s Specialist; CDPE Certified Distressed Property and Short Sale Expert, for more info, visit her website at www.jprealdeal.com and on Facebook https://www.facebook.com/realdealconsulting. Call her at 571-432-8335 or email at email@example.com for free confidential consultations.