Life is full of changes … some daily and others over the course of time. One day you’re making sandwiches for a little one’s lunchpail, and the next breath you’re loading up boxes of clothes and mementoes that are taking up preciously needed space. I get it; managing the various stages from Act One to Act Retirement are exciting and scary at the same time.
“Think about your particular assignment at this time in your life,” advises Marjorie Pay Hinckley. “Our assignments are varied and they change from time to time. Don’t take them lightly. Give them your full heart and energy. Do them with enthusiasm. Do whatever you have to do this week with your whole heart and soul.”
It’s not uncommon for the changes of life to also lead to a change in home needs. Many people begin by writing their wish list, with location and square footage being top priorities and yard size or upgraded amenities listed and starred.
However, it’s difficult to identify the houses that fit the new needs without a price point. Most understand that price point qualifications are determined by a lender evaluating assets, income and credit. What isn’t as well understood is that different loan products potentially offer different down payments, interest rates and mortgage insurance requirements that impact the monthly total and therefore the price point.
Four loan products are most commonly considered for home finance; A lender is best apt to give guidance on which is best for particular situations, however, going into the conversation with a lending professional understanding the differences is important.
A Conventional loan typically has a fixed interest rate, which means that the interest rate does not change over the life of the loan. Conventional mortgages are not guaranteed by the federal government and, as a result, typically have stricter lending requirements. Downpayments can be as low as 3% for particular situations, though it is more common for 5% down to be the minimum. With 20% down, there is no mortgage insurance charge.
An FHA loan is a mortgage that’s insured by the Federal Housing Administration. They are popular especially among first time home buyers because they allow down payments of 3.5%, and accept lower credit scores. However, borrowers must pay mortgage insurance premiums, which protects the lender if the borrower defaults, regardless of downpayment amount.
USDA loans are low-interest mortgages with zero down payments designed around income-specific caps and allow borrowers with poorer credit to qualify for a loan. To use a USDA loan product, the purchase much be made in a designated rural development area. These areas are identified using the most recent population census numbers and can change as growth happens.
A VA loan is a mortgage available through a program established by the US Department of Veterans Affairs. With VA loans, veterans, active service members and their surviving spouses can purchase a home with little to no down payment and no private mortgage insurance. The borrow does need to provide a DD214.