Understanding the types of loan programs offered and which works best for you is key in your home buying journey. After the 2007 housing market crash it is important to understand that there are now home loan programs in place that make sure to check if buyers can afford the property before loaning out the money. There are other loan programs that exist but these are the three most common loan programs:
(FHA) Federal Housing Administration Loan
The FHA mortgage can typically be misconstrued as a first-time home buyer loan; it is actually meant for those who have small down payments and lower credit scores. The FHA loan typically allows first-time home buyers to get into their homes with less than 20% that is traditionally referred to for the down payment.
The downside to a FHA loan is that it requires mortgage insurance, which is a monthly premium that is added on to the mortgage payment and lasts for the life of the loan. The pros of the FHA loan is that it allows home buyers to get into a home for less money out-of-pocket and the requirements for loan qualification are more lax, compared to the traditional conventional mortgage that would require a higher credit score and more down payment.
Another benefit of the FHA loan is that buyers could use it as an investment opportunity to purchase duplex, triplex, or fourplex with one unit being the buyer’s permanent residence. This allows first time buyers to invest in property, becoming a landlord and building wealth.
Every year the loan limits adjust based on the previous year’s market performance. In January 2022 the FHA loan limit will be $420,000.
Conventional Mortgage Loan
The Conventional Mortgage allows as low as 3% on the down payment, but typically clients who use this loan will provide 5% – 20% for their down payment. The upside of the conventional loan are that the rates are competitive, and once the home buyer hits that 20% down payment or has 20% in equity the mortgage insurance can be removed. This makes the monthly overall payments lower compared to an FHA payment.
Conventional Loans are also used as an investment opportunity, as mentioned above, to purchase property that allows buyers to become a landlord and generate money.
The maximum loan amount for Conventional loans in January 2022 is up to $647,000. This opens up opportunities for home inventory in the current Las Vegas housing market.
(VA) Veteran Affairs Home Loan
This loan is available for those who are active in armed service, veterans, as well as their surviving spouses. This is one of the best programs out there for veteran and active armed service buyers. There are different qualifications depending on the type of service and type of discharge, but generally speaking these are benefits of having a VA loan:
- Zero down payment to purchase the home, the only thing the buyer would traditionally have to pay are the closing costs, which vary depending on the home.
- Very low interest rates that are competitive
- No monthly mortgage insurance
- Credit scores as low as 580 are accepted at Fairway Independent Mortgage Lender
At Fairway they also take into consideration the debt to income ratio, utilities, how much money the buyer will have left over at the end of the month after their bills, allowing for the buyers to qualify for a significantly larger loan amount compared to if they were to go for an FHA or Conventional loan. There are also no maximum loan limits, meaning a buyer could purchase a $1,000,000 home if they qualified.
Custom Fit Real Estate
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