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Types of Financing

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Conventional Loans
FHA-Insured Loans
VA-Guaranteed Loans

Conventional loans are considered the most secure because the LTV (Loan-to-Value) ratio is low. In this type of loan the borrower usually puts 20% of the purchase price as a down payment. Since 20% or more is used in conventional loans, you wont need PMI (Private Mortgage Insurance).

FHA Insured loans or Federal Housing Administration allows some buyers who wouldn’t normally qualify for a loan to get one. It does this by taking away the risk to the lender by being insured by the FHA. As long as the loan is for a one – four unit owner occupied residence you can prepay with no penalties. The lender may charge discount points and loan origination fee but you can negotiate with the seller and have some of the points paid by them. Also, discount points are tax deductible to buyers regardless of who pays them.

VA guaranteed loans are loans that are guaranteed to the lender by the Department of Veterans Affairs. This is also offered to unremarried spouses of veterans who’s death was service related. To qualify you must be a veteran with no dishonorable discharge and who meets the following.

90 active service for World War II, Korean War, Vietnam conflict, and Persian Gulf War Vets.
A min of 181 days of active service during peacetime between July 26, 1947 and September 6, 1980 (or 10/16/81 if an officer)
2 full years of service during any peacetime period after September 7, 1980 (or after 10/16/81 if an officer), or if called to active service for at least 181 days after that date.
Six or more years of continuous duty as a reservist in the U.S. Army, Navy, Air Force, Marine Corps or Coast Guard or as a member of the army or Air National Guard (eligibility expires on September 30, 2007)

The advantage of a VA loan is that there is no down payment required, there is no monthly mortgage insurance to pay, there are limits on the buyers closing costs, and there are no prepayment penalties.

Author:mattAdmin