Government and Military Loan Options
Buying a home with no money down is commonly done using a VA loan. The 203(k) loan and FHA loans offer low down payment programs but Uncle Sam has even more in his bag of tricks. Types of mortgage loans backed by the federal government come in all shapes and sizes today. It really depends on what shape the property is in, what eligibility requirements homebuyers meet, how much money they can work with and where they will live. Since there are a variety of feasible options, be sure to research which government mortgage loan works for you specifically.
While commonly referred to as an FHA loan, the FHA loan is actually not granted by the Federal Housing Administration (FHA). A homebuyer secures a loan from an FHA approved lender then the FHA insures the loan for that lender. Benefits generally found with loans insured by FHA include low down payment and no more than one percent of points being charged by lenders at closing. In some cases, FHA may even be able to help cover some of the closing costs. Customary requirements of landing an FHA-secured loan include having good credit, getting enough money for a down payment of at least 3.5 percent, obtaining mortgage insurance and making sure no more than 29 percent of income will go toward proposed housing expenses. Homebuyers cannot use this loan if the home exceeds the FHA mortgage limit. For example, the most someone could qualify for an FHA loan for in southern Hampton Roads would be a single-family home priced at $458,850.
One of the more common types of mortgage loans in Hampton Roads is the popular VA loan. This mortgage loan is not given by the U.S. Department of Veterans Affairs- only guaranteed by them. A recommended lender will be loaning the actual money. For those looking at buying a home with no money down, the VA loan program allows for this type of financing which is a huge selling point for many homebuyers today. Benefits to these types of loans include closing costs capped by the government, no need for private mortgage insurance and limited appraisal costs. Homebuyers will need to get a Certificate of Eligibility (COE) that proves they are veterans. Applicants will need decent credit, sufficient income and plan to use the house as a primary residence.
There are even types of mortgage loans for buyers who wish to rehab a home. The Federal Housing Administration offers the 203(k) loan for homebuyers interested in homes that need extensive repairs or renovations. The 203(k) loan program works as follows: the repair amount is added to the property's purchase price, then buyers only have to come up with 3.5 percent of the total amount. For example, if a house is $200,000 and repairs are estimated at $25,000, then 3.5 percent of $225,000 would be $7875. The Streamline(k) mortgage loan is for homebuyers purchasing a home that only needs a limited amount of repairs that are nonstructural in nature. Under the Streamline(k) program, buyers can wrap additional repair costs under $35,000 into their mortgage. This way, repairs can be completed before homebuyers actually move into the house. A scenario for the Streamline (k) may involve finding a home in good shape that just needs a new roof.
The United States Department of Agriculture Rural Housing Service (RHS) offers a program that guarantees loans for homebuyers in rural areas. RHS loans are geared for those who may be considered low- to moderate-income families. A serious bonus is that USDA requires no down payments; buying a home with no money down is easily done with this government loan program. Other benefits include no mortgage insurance and being able to wrap closing costs into the loan amount. Applicants must have decent credit, buy a modest home in a rural area, earn regular income (not to exceed 115 percent of town's median income) and live in the property as a primary residence.
If buying a home with no money down is what is most important, it can be done. If you're not a veteran, research the RHS loan and see if it can work for you. The 203(k) loan is a wonderful opportunity for visionaries without tons of cash. The FHA loan is a nice option for getting that house too. Active military, veterans and their surviving spouses can use the VA loan to purchase a home. The government has so many types of mortgage loans available to help make home ownership a reality.
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