There are many different types of loans but they can be grouped together in two main categories: conforming and nonconforming. The conforming category can be subdivided into what are called conventional and government loans. Conforming means that a preset criteria has been established and if you conform to the guidelines then you can get a conforming or “A” paper.
To learn more about creative financing for the self employed or less than perfect credit.
Government loans are subdivided into FHA and VA loans. VA is for veterans of the military. This type of loan is guaranteed by the federal government in the event of a default by the borrower. It is a true 100% loan, where the buyer literally borrows 100% of the purchase price in one loan. Most no-money deals have a little creativity in them with a grant, down payment assistance or some form of two loans, but they usually are not one sole loan for 100% of the purchase price.
FHA stands for Federal Housing Authority. FHA is a branch of HUD (Housing and Urban Development). When you hear the phrase “HUD home,” you’re hearing about a foreclosed home that had an FHA loan.
FHA is an insured loan. Typically if you have less than 20% for a down payment, a bank is not too excited about lending you money. Well if everyone had to have 20%, where would be? So to offset the risk to the bank, mortgage insurance or MI was developed. FHA has an upfront MI that can be financed in the loan. MI paid on a monthly basis is another option. So all loans with less than 20% down have some form of MI and whether it is through a private MI or an FHA loan it will have a higher interest rate.
FHA requires a 3.5% down payment. The money can be a gift, it cannot be borrowed and the gift cannot be from the seller.
Utah Housing is another place to get a good loan with no money down. It is a program specifically designed for first time home buyers.
Of course if you have 20% down we can do those in our sleep.
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