Mortgage Loan Programs
By Gustan Cho
Selecting the best mortgage rates can be challenging but will be worth the time invested for a home purchase mortgage loan borrower as well as a refinance mortgage loan borrowers. Mortgage rates vary depending on a mortgage loan borrower’s credit scores, debt to income ratios, and loan to value. Mortgage rates also vary from the various different mortgage loan programs such as VA Loans, FHA Loans, USDA Loans, HomePath Loans, Conventional Loans, Jumbo Loans, and Adjustable Rate Mortgages. Mortgage rates also differ from 30 year fixed rate mortgage loans, 15 year fixed rate mortgage loans, and adjustable rate mortgages. Depending on your goals and how long you intend to live in your home, selecting the best mortgage rates can be simplified with the advice of your mortgage loan originator.
Selecting The Best Mortgage Rates And Program For Your Needs
There are many mortgage loan products in the market today that you might qualify for, however, the question is what is the best mortgage product for your needs and goals and going about selecting the best mortgage rates for you. The best way to go about in selecting the best mortgage rates is by starting to eliminate the mortgage loan programs that you do not qualify for. For example, if you had a foreclosure three years ago, you cannot qualify for a conventional loan because the waiting period to qualify for a conventional loan after a foreclosure is 7 years from the recorded date of the foreclosure. However, with a regular foreclosure, you can qualify for a FHA Loan, VA Loan, and USDA Loan. You can weigh your options with these three mortgage loan programs and see which loan program you qualify for and see the types of options these programs offer in helping you selecting the best mortgage rates.
FHA Mortgage Program And Rates
FHA Loans offer one of the best and most flexible mortgage loan programs for first time home buyers as well as home buyers with prior bad credit and recent bankruptcy or foreclosure. A home buyer can qualify for a FHA insured mortgage loan with a 580 FICO credit score and a 3.5% down payment. Home buyers who had a prior bankruptcy and the bankruptcy discharge was seasoned for at least two years can qualify for a FHA loan. Home buyers with a prior foreclosure, deed in lieu of foreclosure, or short sale can qualify for a FHA loan after 3 years from the recorded date of the foreclosure and/or deed in lieu of foreclosure or the short sale sales date reflected on the HUD settlement statement. Mortgage rates for FHA loans are lower than conventional mortgage rates. However, FHA has mandatory upfront and annual mortgage insurance premium. The upfront FHA mortgage insurance premium is a one time fee of 1.75% which can be rolled into the loan. There is a mandatory 1.35% annual mortgage insurance premium for all 30 year fixed rate FHA loans that can be quite costly. A home buyer can actually have a higher monthly housing payment with a lower interest FHA loan compared to a higher interest conventional loan due to the hefty FHA mortgage insurance premium. Home buyers should definitely compare which mortgage program is better and less costly for them and compare both FHA loans to compare loans.
VA Mortgage Loan Program And Rates
The United States Department of Veteran Affairs offers qualifying members of the United States Armed Services and its veteran VA loans which enables them to purchase a home with 100% financing where no money down is required. There is a funding fee but the VA funding fee can be rolled into the VA loan. There is no monthly mortgage insurance required on VA mortgage loans like there is for FHA loans. VA loans normally offer lower mortgage rates than FHA mortgage rates, however, VA mortgage lending guidelines are slightly tougher than FHA loan programs. If you qualify for both VA and FHA loans, you can compare and shop which program is better for you in selecting the best mortgage rates.
Conventional Mortgage Loan Programs
Conventional mortgage loans are called conforming loans due to the fact that it needs to conform to mortgage lending guidelines set by Fannie Mae and Freddie Mac. Conventional loans have much tougher mortgage lending guidelines than FHA, VA, and USDA Loans. Conventional mortgage loans also have higher mortgage rates than government loans and the minimum credit scores required to qualify for a conventional mortgage loan is 620 FICO. Conventional loan mortgage borrowers with lower credit scores will get much higher mortgage rates. A 620 FICO credit score is considered pretty low for a conventional mortgage lender and the conventional loan borrower with a 620 FICO credit score will pay the highest available conventional mortgage rate. To get the best conventional mortgage rate, the mortgage loan applicant should have credit scores of 740 FICO or higher.
With conventional loans, the more down payment a home buyer puts down or the lower the loan to value for refinance mortgage borrowers, the lower the mortgage rate. In selecting the best mortgage rates, it may be more beneficial for you to get a FHA loan versus a conventional loan if you have lower credit scores.
USDA Mortgage Loan Programs
The United States Department of Agriculture offers USDA mortgage loans, also called Rural Development loans, for qualified home buyers which enables them to purchase a home in rural and suburban areas selected by the United States Department of Agriculture with no money down and 100% financing. The home needs to be in a USDA area and there is a restriction on the maximum household income.