Lending 101

Are you thinking about getting a loan to buy a home? There are many different types of loans. Here are a few of the options. For more information you can visit goprimeasheville to get a more detailed look at what type of loan is best for you.

The US Department of Veteran Affairs (VA) helps veterans, active duty service members and eligible surviving spouses get mortgage loans through a lender. You need a veteran’s certificate of eligibility and a VA-assigned appraisal to qualify. Benefits include:
• VA loans offer a 100% finance option, eliminating the need for a down payment.
• Lenders are encouraged to relax credit requirements.
• VA loans do not require monthly mortgage insurance since the government guarantees the loan.
• Often, you can get lower interest rates with a VA loan.

Well suited for first-time homebuyers, FHA loans have more relaxed requirements than conventional mortgages. In some cases, you can have a recent bankruptcy in your past and still qualify for a loan. Protected by the Federal Housing Administration, these loans may be attractive to first-time homebuyers for these benefits:
• Down payments for an FHA loan may be as low as 3.5% of the purchase price, not 20% or more.
• You can use a monetary gift for your down payment and closing costs.
• You can get either fixed or adjustable interest rates with a FHA loan.
• FHA loans may be streamlined, so you need less paperwork, simplifying the process.
• Grants and down payment assistance programs help you cover closing costs.

Sometimes referred to as “rural housing loans” because the loans are guaranteed by the U.S. Department of Agriculture, USDA mortgage loans are perfect for first-time homebuyers. USDA loans have to be used for your primary residence, not a second home, and you have to meet the eligibility requirements. Here are the main benefits:
• USDA loans do not require any down payment.
• You can finance up to 100 percent of a home’s value.
• USDA loans are restrictive in certain areas (get details)
• You may qualify for lower mortgage insurance premiums (PMIs).

Conventional loans are ideal for well-qualified purchases, second homes or investment properties. You must have a good credit score, meet a minimum income threshold and be ready to plunk down 3–20 percent for the down payment. But these mortgages offer good benefits:
• Conventional loans have fewer restrictions than other loan types.
• They’re excellent options for second homes, vacation homes or investment properties.
• Conventional loans require no upfront mortgage insurance premium (PMI) or funding fee.

Fixed-Rate Mortgages
The most popular loans by far, fixed-rate mortgage loans have a set interest rate that doesn’t change over the course of the loan. Most fixed-rate loans have a set length of 15 or 30 years. Some benefits of a fixed-rate mortgage include:
• Your monthly payments never change.
• It’s a “safe” loan, meaning it’s free of surprises.
• You can lock in 40-year low interest rates for long-term security.


Article courtesy of Zachery Adam of Prime Mortgage Lending of West Asheville.