Get the Lowdown on Government-Backed Mortgage Loans

Get the Lowdown on Government-Backed Mortgage Loans- 150x150The Federal Housing Administration, the United States Department of Veterans Affairs and the United States Department of Agriculture are backing several types of mortgage loans, designed mostly to help those who can’t afford a conventional loan. The government insures these loans against default, meaning that if the borrower stops making monthly mortgage payments, the government becomes responsible with paying the lender.

Regular mortgage loans have very strict qualification requirements and require large down payments. Normally, borrowers are required to make a minimum of 20 percent down payment, but those with good credit scores can qualify for lower down payments. However, if a borrower makes a lower than 20 percent down payment, he or she will have to pay for Private Mortgage Insurance (PMI), which could actually make the overall value of the mortgage loan higher.

The government has designed several mortgage loans designed to help those who can’t afford the high down payment and the strict requirements. Because these loans are insured by the government, borrowers are not required to pay for Private Mortgage Insurance anymore. This article will discuss the main advantages of government-backed mortgages, helping you decide which mortgage loan is better for your situation.

The FHA Mortgage Loan

FHA mortgage loans are backed by the Federal Housing Administration and are mostly geared towards those who can’t come up with a large amount of money to make the down payment, or those who can’t afford to make a lower than 20 percent down payment and end up having to pay for Private Mortgage Insurance.

FHA mortgage loans require a much smaller down payment than conventional loans, making them very attractive for many home buyers. The down payment, which can be a gift, can be as small as 3.5 percent of the loan amount. Closing costs, which can be a bit high, can be financed, and will be included in the loan amount. The downside to this is that you will have to pay interest for those costs as well. This type of loan has more flexible requirements than conventional loans, and can be used to finance single or multi-family homes, condos, or manufactured homes. One downside to FHA mortgage loans is that you can’t borrow as much as you would with a conventional mortgage loan, but these limits differ from one area to another.

The VA Mortgage Loan

VA mortgage loans are insured by the United States Department of Veterans Affairs and are designed to help active duty or retired military personnel become home owners. VA loans require the borrower to use the home bought with a VA loan as a primary residence. VA loans can also help spouses of military members who died in active duty.

Like FHA loans, VA loans eliminate the need requirement to pay PMI, but require a 2 percent founding fee, which can be financed. Unlike conventional loans and even FHA loans, VA loans don’t require a down payment. Also, there is no limit to how much you can borrow on a VA loan.

The USDA Loan

The United States Department of Agriculture also comes to the help of low-income families by insuring a loan for those who wish to buy a home in a rural area. This type of loan can only be used to finance a home which is located in a rural area, in order to increase home ownership in those parts of the country.

Like with VA loans, the borrower who buys a home using a USDA loan must use that home as a primary residence. Another requirement is that the home buyer must be unable to qualify for a regular mortgage loan and pay PMI. USDA loans don’t require a down payment and the closing costs can be financed by including them into the loan amount.

For those who can’t qualify for a conventional mortgage loan, or for those who find these types of loans more attractive, the FHA, the VA, and the USDA loan are great options. These mortgage loan requirements are generally less strict, which will save you a lot of trouble and even money in some cases. So before applying for a regular mortgage loan, take a look at government-backed mortgage loans, which might prove to be a great alternative.

Getting a Mortgage Loan for Manufactured Homes – It’s Easier Than You Think!

Getting a Mortgage Loan for Manufactured Homes-It's Easier Than You Think- 150x150Manufactured homes are a good alternative to conventional homes, but still follow a similar home buying process. A manufactured home, also referred to as a mobile home, is a type of home that is factory built, with a steel frame, and that can be transported anywhere on its own wheels. This can also mean homes that are prefabricated, meaning that they look very similar to traditional houses, but are built as modules that are then transported and assembled on a normal house foundation.

These types of homes are usually cheaper than traditional homes, but most people will still probably have to take out a mortgage loan in order to purchase a manufactured home. Unfortunately, getting a home loan for a manufactured home can be more difficult than taking out a mortgage for a traditional home. Not only that, but you will most likely have to pay a higher interest rate on a manufactured home. Two or three percent more on your interest rate can mean thousands over time. Here are a few options if you are considering buying a manufactured home with a mortgage loan.

FHA or VA Loans

The Federal Housing Administration (FHA) and the United States Department of Veterans Affairs (VA) have designed mortgage loans that can help home buyers with lower incomes as well as for military active and retired personnel.

Because the minimum square footage is required to be 400 feet for an FHA loan to be approved for purchasing a manufactured home, single-wide homes cannot be bought using this type of government insured mortgage loan. Also, the home owner must pay the same property taxes as he or she would pay on a traditional home. In most areas the owners are required to strap the manufactured home to the ground using anchors or concrete pylons. The home’s wheels may have to be taken down, depending on that area’s regulations. The amount that you can borrow to purchase a manufactured home is much lower than the amount that you can borrow for a traditional home, when taking out an FHA mortgage loan, and it is based on whether you take out a mortgage for the lot, the home, or both.

The United States Department of Veterans Affairs requires that you use the home as your primary residence in order to qualify for a VA loan. Your credit score must be good and your debt shouldn’t be more than 41 percent of your income. You are able to borrow up to 95 percent of the home’s value with a VA mortgage loan.

Lot Owners Are At An Advantage

If you own the lot on which the manufactured home will be placed, and if it will be placed on a house foundation, you will receive better interest rates and loan terms from lenders. If the home will be your residence, you will be able to deduct your interest payments. However, this won’t be the case if you rent the property.

Normally, financing for manufactured homes is done through the company that sells the home. Other lenders will, most likely, require that you own the lot on which the house will be, or your mortgage loan application will risk being denied.

Manufactured homes are cheaper than traditional homes and is a great alternative when you don’t have enough money available to buy a home. Before buying a home with a mortgage loan, do a little research in order to avoid being denied the loan for something that could have been prevented.

Current FHA Mortgage Rates vs. Current VA Mortgage Rates

Current FHA Mortgage Rates vs. Current VA Mortgage Rates- 150x150Both Federal Housing Administration (FHA) and Veteran Affairs mortgage loans are backed by the government and both are good alternatives to conventional loans for people with lower incomes. While the rules of handing out these types of loans are written by the government, it is still up to the individual lender to decide if you qualify, based on their own set of rules, which are usually stricter than the government’s guidelines.

Similarities and Differences Between FHA and VA Mortgages

Both types of mortgage loans were developed by the United States government in order to aid people who don’t possess the means to secure a conventional mortgage loan. Buying a home if you have low income is extremely difficult so, through these two types of loans, the government gives more people the chance of becoming home owners. People who would normally be refused a conventional loan by banks and credit unions can qualify for an FHA or VA loan with a much lower credit score. The government doesn’t hand out the loan, but insures it against a default, giving people who are regarded as a high default risk the possibility of buying a home.

The biggest difference between them is that, in order to qualify for a VA loan, you have to be an active-duty military member, a veteran, or a surviving spouse. So a person who is serving or has served in the military can qualify for both types of loans, but someone who hasn’t served can only qualify for a FHA loan if he or she meets the other requirements.

Other differences between the FHA and VA mortgages have to do with the applicant’s income, the down payment, and mortgage insurance. FHA loans have more restrictions when it comes to someone’s income than VA loans do. The money that you will have to put down as a down payment is also a big difference between FHA and VA mortgage loans. While FHA loans require a minimum 3.5 percent down payment, VA mortgage loans do not have a down payment requirement. Lastly, you will be required to pay mortgage insurance for at least 5 years, if you choose an FHA loan, while VA loans don’t have this requirement.

Current FHA Mortgage Rates

Most lenders offer 3.5 percent interest rates on 30-year fixed rate-mortgage loans, which means that FHA mortgage rates remain near historic lows. Also, most economists predict that FHA rates will remain under 4 percent for 2013. Interest rates for 15-year fixed-rate mortgage loans also remain low, in the neighborhood of 2.70 percent.

FHA mortgage rates were around 3.90 percent last year at this time, hitting a historic low at the beginning of 2013, and they remained in that range since then. Freddie Mac‘s economists say that they expect FHA mortgage rates to reach 3.75 percent by the end of the year.

Current VA Mortgage Rates

VA mortgage loans are backed by the government through the Department of Veterans Affairs, but they are not the ones who set the interest rates. VA mortgage interest rates are set by each lender who is approved by the VA. There are many factors that have an influence on what your VA mortgage rate will be, so working with a VA specialist is recommended.

Current VA mortgage rates hover around 3.25 percent for a 30-year fixed-rate VA mortgage loan and around 3 percent for a 15-year fixed-rate VA mortgage. The short-term prediction is that VA mortgage interest rates will decrease by a small percent, but they are at near record lows right now, so it is up to you if you want to risk it and wait longer.

Familiarizing yourself with the current FHA and VA mortgage rates can help you spot a good deal when the time comes. Choosing between an FHA and a VA mortgage loan depends mostly on your individual situation and your future plans. The current mortgage rates are fairly close for both loans, but you need to take into account all of the characteristics of each loan and decide to go with the one that best fits your needs.

Top 10 Types of Mortgage Loans

top 10 loan types- 150x150A mortgage is a type of loan where the bank or another lender loans you a large amount of money, which you must repay with interest over a set period of time. There are several types of mortgage loans available, each tailored to meet the needs of a specific group of home buyers. Searching for the mortgage loan that best suits your financial situation must be treated very seriously. Here is another resource to help you decide: mortgage lender or mortgage broker?

Types of Mortgage Loans

Even if you are considering getting professional advice before choosing a mortgage, it is always wise to know what options you have before talking to a professional. Knowing what types of mortgages are available will not only make things easier to understand, but also put you in a position where you can ask the right questions, making sure that what you choose is the right option for you. Additionally, here is a list to help you find the Best Mortgage Rates.

Top 10 Mortgage Loans Available from Most Lenders

  1. Fixed Rate Mortgage. This type of mortgage is the most popular mortgage in the United States, and is suitable for individuals who plan to keep their house for more than a couple of years. Usually, the life of a fixed rate mortgage is 15 or 30 years, but it can also come in terms of 10, 20, 40, or even 50 years. The interest rate and the monthly payments remain fixed during the life of the loan, thus homeowners can manage their budget more easily knowing exactly how much they owe to the lender every month. In case rates drop, homeowners have the possibility of mortgage refinancing to get a more advantageous interest rate. Here is a list of the Best 5-Year Fixed Mortgage Rates.
  2. Adjustable Rate Mortgage. Also known as ARMs, adjustable rate mortgages are preferred by people who aren’t expecting to own a house for a long period of time. With an ARM, individuals have a predetermined adjustment interval (6 months to 5 years), for which the interest rate will be fixed.  After the adjustment period, the interest rate will usually go up, and then change periodically over the term of the loan, as specified by the lender.  Before committing to this type of mortgage, homeowners should make sure that they can afford the highest possible payment of their loan, as sometimes the interest rate can go up by 6 percent. Some of the most common ARMs are: 1-year Adjustable Rate Mortgage, Hybrid or Intermediate ARM, Flexible Payment Option ARM, and Convertible ARM.
  3. Balloon Mortgage. A balloon mortgage will have a fixed rate for a period of 5 to 7 years, after which the remaining balance is due in its entirety. Because of its large size, the final payment is also known as a balloon payment. Balloon mortgages are best for people who intend to sell their house before the balloon payment must be made.
  4. Jumbo Mortgage. When the mortgage loan is over Freddie Mac and Fannie Mae traditional loan limits, the mortgage is called a jumbo mortgage. The conforming limit for a jumbo loan is $625,000. A jumbo mortgage will require a larger down payment, and the interest rates will be higher compared to the interest rates of a conforming loan.
  5. Interest-Only Mortgage. With this type of mortgage, homeowners have the option to pay only the interest of their principal, for a period of five or ten years. After this initial period of time, the principal balance will be paid down over the remaining years of the loan. Due to the fact that interest-only loans are riskier for the lenders, the interest rate might be higher, but these loans are still attractive to homeowners because they offer financial flexibility during the interest-only period.
  6. Reverse Mortgage. Available to elderly individuals 62 years old and over, a reverse mortgage is a lifetime mortgage secured by the equity in the borrower’s home. Elderly homeowners can transform a portion of their home’s equity into cash. During the term of the loan, homeowners are not required to make any monthly payments. Reverse mortgages allow elderly persons to live in their own homes, and the owners only repay the loan if they sell the house or move to a nursing home. In the event of homeowners’ death, the loan must be paid in full by their heirs. Here is a list of the Top Reverse Mortgage Lenders.
  7. Veteran Affairs (VA) Mortgage. A VA loan is a government insured mortgage available for veterans, their eligible spouses, and service members only. Issued by a regular lender, a VA loan requires no down payment, and the borrowers don’t pay any mortgage insurance, or a penalty fee in case they pay off the loan earlier.
  8. Federal Housing Administration (FHA) Loan. Insured by the FHA, this government guaranteed loan is great for first-time home buyers, as well as individuals who can’t afford a large down payment, or have a poor credit score. A FHA mortgage offers better interest rates than conventional mortgages, and the lender might show the borrowers leniency in case of financial setback.
  9. Graduated Payment Mortgage (GPM). GPMs are available in 15 and 30-year loan terms, and are more suitable for young individuals, such as students, who wish to purchase a home, but currently do not have financial resources to pay for a loan. A GPM offers affordable monthly payments in the beginning, after which the payments will gradually grow by a percentage decided in advance. This increase stops after several years (5 to 15 years), and the borrower will pay a fixed amount every month for the rest of his loan life. The GPM is a type of negative amortization mortgage. Negative amortization (NegAm) occurs when the mortgage payment for a period of time is lower than the interest due for the same period of time, causing the balance of the loan to rise.
  10. Pledged Asset Mortgage. Also known as Asset Integrated Mortgages, and Asset Backed, pledged asset mortgages allow burrowers to use their financial commodities, such as bonds, stocks, CDs, as collateral for the mortgage loan, instead of a down payment. This kind of mortgage is intended for individuals who have enough income to easily afford the monthly payments of a loan, but who have their cash engaged in investments. A pledged asset mortgage offers attractive rates, and don’t require a mortgage insurance, but it is more accessible by wealthier people.

Choosing the right type of mortgage loan will not only save you money, but give you peace of mind for the following years. Being aware of your financial situation, budget, and understanding that paying off a loan can take a while, in which many things can happen or change, are keys to making the best choice when it comes to mortgage loans.