Fulfilling the dream of home ownership can be one of the happiest times in a person’s life, but at the same time, one of the most stressful. In today’s real estate market, the process of securing financing for a home is the largest contributing factor to a buyer’s stress- especially to a first time home buyer. Our team knows that having a basic knowledge of which home loan might best be suited for their needs is beneficial to a buyer before speaking with a lender.

Conventional

This is the most common type of loan for purchasing a home. Conventional loans are not guaranteed by the Federal Government.  There are two types of conventional loans, “conforming” and “non-conforming”. Conforming loans follow Fannie Mae and Freddie Mac guidelines, non-conforming loans do not, but they are considered conventional.  Borrowers must met eligibility requirements and a higher FICO credit score is required for loan approval, because it is not backed by the government. Conventional loans require anywhere from 10-20% of the sales price for down payment  and closing costs and have a stricter debt-to-income ratio . If a borrower puts less than 20% down, PMI insurance is required.  Types of conventional loans include: fixed rate, adjustable rate, bridge loans, balloon loans, and hybrid loans.  All of these types differ in their payment terms and interest rate structure.

FHA

FHA loans are guaranteed by the Federal Housing Administration. The FHA loan program is favored for first-time home buyers and borrowers that are credit challenged. Purchasers are required to live in the home purchased.  The standards for this loan are slightly more relaxed than traditional home loans and require a much smaller down payment. Most of the closing costs and fees can be included in the loan.  FHA loans do have a maximum limit and this varies from county-to-county in Georgia. Not all private lenders originate FHA loans, so be sure to ask before making application.

Added benefits:

·     No prepayment penalties

·     FHA loans can be assumable

·     Down payment and closing costs can be gifted

·     Sometimes leniency is shown to borrowers during hard economic times

USAA

The USAA is a financial institution that serves qualifying members of the United States military. They offer a full range of loans with competitive rates to eligible veterans, surviving spouses of veterans and active duty military.

VA

The VA loan is guaranteed by the U.S. Department of Veterans Affairs and issued by qualifying lenders.  VA loans are offered to eligible veterans, surviving spouses of veterans (if not remarried) and active military. Borrowers can finance up to 100% on the value of the home.  There are maximum loan amount limits in place and it varies by county in Georgia. VA loans require a small funding fee, but this amount can be financed.

Benefits of VA:

·      The need for PMI insurance is eliminated

·      No down payment is required

·      Interest rates are lower than other loan programs

·      Fixed rates with 15 or 30 year terms

·      Sellers are allowed to pay all of the closing costs, provided they do not exceed 6% of the sales price

USDA/RD

The USDA Rural Development Loan (RD) is a 100% purchase loan that is insured by the Federal Government.   This loan program allows more low to moderate income families and individuals to become home owners, but borrowers must still meet minimum credit standards. There are a number of limitations to this loan program, including location and condition of the property. A small guarantee fee is required but this amount can be financed. Foreclosed homes and mobile homes may be financed through this loan program, provided they meet certain requirements.  First of all, buyers should determine if the area in which they want to purchase a home qualifies for the RD loan.  Please visit the USDA website to view a property eligibility map for Georgia.

Benefits of USDA/RD loan:

·     No down payment  or minimum cash contribution is required   by the borrower

·     Closing costs can be financed provided the home appraises for more than the sales price

·      Allows for gifts for the closing costs

·      No PMI insurance is required

·      There is no maximum loan limit

 

Construction to Permanent

This type of loan is designed for borrowers wishing to build a new construction custom home on land they already own or in the process of purchasing.  Developers, investors, and business owners can also be approved for this loan. A Construction to Permanent loan covers the cost of construction and the mortgage on the completed home.  The lender provides the borrower with a construction line of credit, which the builder uses to pay subcontractors and buy materials during the construction phase. Once construction is completed, the borrower converts the loan into a mortgage.  This loan involves more paperwork than traditional mortgages and lenders require that the builder be licensed.  

Benefits of Construction to Permanent loans:

·         “All-in-One” convenience of combining loans

·         During construction, payments are interest only

·         Loan can be fixed rate or adjustable

·         Rate lock options

·         One closing and one set of closing costs saves money

·         No pre-payment penalties

 

 

 

 

The information provided on our website regarding loan programs is for basic information purposes only. Innovative Land Solutions brokers and agents will not provide a statement of loan terms or closing costs. Our team can refer interested individuals to several local, licensed mortgage loan originators. Seek the advice of a licensed professional for tax/and or legal issues.