Mortgage Programs For Homebuyers
Whether you’re thinking about buying your first home or you’ve been contemplating an upgrade, you probably already know that there are several different kinds of home mortgages, some that seem pretty much alike at face value. FHA, VA, USDA — what does it all mean?! We’re about to take all the stress out of choosing the mortgage that’s right for you and your family (even if that family is just you and Spot the cat).
Mortgage Basics in a Nutshell
There are a few different elements of a mortgage that are important to understand before we move forward in this process. You already know stuff like interest rates and what your payment and interest payments are, but there are other things that might not be quite so well settled in your mind. Most homeowners have questions about the following mortgage related definitions:
Loan features. When you get a mortgage, it often has other stuff that comes with it. After all, this isn’t the same as borrowing money from your mom, banks have fancy lawyers who make sure they earn their keep. You may notice features like “assumability” and “prepayment penalty” listed on your initial loan form.
Assumable loans are loans that you can literally transfer to another person when they buy your house. This is useful when interest rates are climbing, sometimes people will pay more for a lower interest rate mortgage they can take over.
Prepayment penalties are very bad and you don’t want this. Basically, you’re punished for paying your loan off early. Typically, they’re part of subprime lending, but you never know when one might pop up elsewhere. Since “prepayment” includes the payoff from selling your home, there’s no winning with this one.
Mortgage insurance. There’s been a lot of talk about mortgage insurance, both for better and worse. To put it simply, mortgage insurance makes it possible for you to bring a down payment as little as about three percent to closing with FHA or conventional type mortgages. It’s a type of insurance that you pay for in case you were to default on the loan. If you do, the insurance company pays out your coverage to your bank, reducing the amount you may be responsible for if the house can’t bring enough at the foreclosure sale to cover your remaining note.
Down payments. Down payments are your initial investment in your home. Many times, home buyers are surprised to see that they have to bring both closing costs and a down payment, having assumed the two were the same. The down payment goes to the bank as proof of your commitment. We’ll get to closing costs.
Pick Your Poison: The Four Basic Home Mortgage Types
Understand that these are not the only mortgages out there, but they are the ones that you’re most likely to use in order to buy a home. Each has its own set of benefits and drawbacks, which we’ll discuss briefly.
Conventional Conforming
If you’ve heard of Fannie Mae or Freddie Mac, you know the family of conventional loans. These loans are written by a wide range of banks, from your hometown locally owned to the fanciest mortgage broker. “Conforming” loans meet Fannie and Freddie’s high requirements, including maximum sales price.
Pros. Generally, you’ll get a better deal on mortgage insurance that automatically drops off (meaning you no longer have to pay it) once your home reaches a 78 percent loan to value ratio. Also, you’ll pay less in closing costs and your debt to income ratio can be somewhat flexible as long as look really good on paper.
Cons. These are generally the hardest loans to qualify for. Even though there are now three to five percent down payment options, your credit score will need to be around 700 (better is better) and your other ducks should be lined up nice and straight. Consistent employment, savings that can be designated as “reserve funds” and few to no scabs on your credit report are helpful.
Federal Housing Authority
The FHA started insuring loans after the Great Depression as a way of helping people get back into owned property. It basically created the 30 year fixed interest mortgage and continues to carefully oversee which homes can and cannot be purchased in its name.
Pros. Good option for first time buyers because of low down payment and credit requirements. FHA will accept “soft” credit lines for people who haven’t established credit yet or have very little, so keep that utility bill paid on time. The program allows up to six percent of your closing costs to be financed into your loan, as “seller paid items,” which can help reduce the actual cash you need to close.
Cons. FHA requires a lot more in closing costs because of the additional upfront mortgage insurance deposit. In addition, if you have less than a 10 percent down payment, under the current programs you’ll be forced to keep paying mortgage insurance for the life of the loan, giving you no options but to refinance or sell down the line if you want rid of it (it’s costly, you want rid of it). Not every banker wants to deal with FHA loans because they can be time consuming to write, so you may have to shop a bit to find a good bank.
Veterans Administration
As part of the benefits that active military members and veterans receive from the government, VA loans are built on a merit-based system. Career military and those honorably discharged early are generally eligible, but short-term members or Reserves may have to meet additional requirements. Anyone who can get this loan will need to bring a Certificate of Eligibility in order to get the ball rolling with an approved lender.
Pros. Favorable interest rates, extremely flexible guidelines and absolutely nothing required as a down payment (often little to nothing required at closing!) There’s no mortgage insurance, just a one time “funding fee” that varies with your service type, down payment and times you’ve used your Eligibility.
Cons. Really, there aren’t any. You can’t get this if you’re not military, though, so that could be a con if you really wanted this most excellent loan type.
US Department of Agriculture
In rural areas, the US Department of Agriculture will offer mortgage lending as a way of helping to keep the local economy flowing. Homes don’t have to be on an acreage, but they do need to be located in communities with under 35,000 inhabitants.
Pros. Like VA, USDA are fairly easy to qualify for as the buyer. They can also be zero down loans, though the more you can bring to closing the better. Payment assistance and other types of help are sometimes available for very low income borrowers.
Cons. The house you’re buying will undergo significant scrutiny in order to be approved for the program. In all loan programs, your house has to qualify, but the hurdles USDA puts in front of the building are much larger than most other programs. This is good for you, because it means you’re getting a great house, but it makes the process take a lot longer and can be scary for sellers. In addition, there’s a cap on income for potential borrowers.
Mortgage FAQs
We offer the ZeroPlus loan on:
- Primary, Vacation, and Investment Properties (1-4 units residential).
- Purchase and Refinances (for KW Agents and KW Transactions).
We do:
- Conventional Fannie Mae and Freddie Mac – min. 3% down
- JUMBO (up to $3 million)
- FHA – min. 3.5% down
- VA - $0 down
- USDA - $0 down
NOT AVAILABLE AT THIS TIME
- Construction, Rehab, HELOC, reverse mortgages, raw land/lots, mobile and manufactured homes, co-ops
- non-warrantable condos, commercial properties
Yes, you may use this in other states that we are licensed in. We are currently NOT licensed in Hawaii, New York, Nevada and Utah.
The ZeroPlus loan is a SYSTEM!!
Backed by cutting edge technology
- clients complete a simple Q&A for loan profile
- securely upload documents right from their phone (or can switch to computer)
Loan officer is the single point of contact through closing
- All our loan officers have an average of 9+ years’ experience
- Available for pre-approval 7days/week 12 hrs/day Sustainable model
Sustainable model
You can market the savings. ZeroPlus loan available to 1st, 100th and 1000th customer
The quickest way to talk with a loan officer is have your client put in name, email, phone # in your branded app and then create an account! When client gets an option within the app to email our customer service, the email topic will let our LOs know the property state, client info, and correct KW agent. The most readily available LO will reach out. This email address is monitored by management and it’s fast!
Click here for quick and easy instructions!
WE HAVE VERY COMPETETIVE RATES and charge NO LENDER FEES.
Have your clients come through the “Keller Mortgage Save Thousands” button on your app and get FULLY Pre-Approved. Once we have access to their information, we do tailor-made rate and fee estimates. Otherwise it is theoretical.
Share YOUR branded KW app with the buyer. If it makes the Buyer’s agent more comfortable, share with the agent first. In fact, this has been a recruiting tool used by KW agents!
Appraisal fees are always comparable to the average for your area. The average price for appraisals we order is $450. Things like size, type of property, and location (far away from a city) can make a difference.
Remember: No deposit required for the appraisal which is ordered day 1 and client is only charged for the appraisal on the contract that closes (and our $1000 lender credit on loans $150,000 and above offsets that)!
If the Buyer requests a copy of the DU approval, we will supply it to the client. Our Pre-approval letters also state clearly that client has been run through DU. Due to confidentiality we cannot supply Buyer agent nor Listing agent a copy of the DU findings.
We recommend keeping it simple!
“Special Financing available”
“Save Thousands!”
Click here for complete advertising guidelines here.
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