Home Loan Options

By: EconomyWatch Content   Date: 17 December 2009

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US citizens have a large number of conventional and government home loan options to choose from. Various home loan options are also available in the rural areas of the country, where people find it difficult to access private loans.

Home Loan Options: FHA Mortgage

FHA home loans are highly secure loans, since they are insured by the Federal Housing Administration (FHA). This enables those homebuyers, who would otherwise get rejected, to get a home loan. This is because loan insurance by the FHA increases the confidence of loan agencies to extend loans. Even if a borrower fails to repay the loan, the loss is borne by the FHA, not the lender. The FHA is not engaged in issuing mortgage loans itself. To apply for an FHA loan, you must contact a lender that offers FHA loans. The borrower is also required to apply for the FHA insurance.

To qualify for an FHA loan, borrowers need to fulfill a number of requirements. The mortgage limit is the primary qualification and depends upon real estate prices in the area where house is located. Some other requirements are:

·        Fair payment history

·        An acceptable debt to income ratio

·        3% Minimum down payment at the time of purchase

FHA mortgage loans enables borrowers with a bad payment history to improve their credit score by making regular monthly payments on home loans.

 

Home Loan Options: VA Mortgage

The US Department of Veterans Affairs guarantees VA loans, which can be issued by authorized loan agencies. The purpose of designing a VA loan was to provide long-term financing to veteran US citizens or their surviving spouse.

A VA home loan is intended to enable eligible veterans finance homes in areas where there is no availability of private financing. It also helps them buy property without making any down payment. Veterans can take advantage of 100% financing on the first loan. Private mortgage insurance (PMI) is not required. A funding fee of 0% to 3.3% needs to be paid to the VA. In the case of refinancing, the loan amount could be up to 90% of the home’s reasonable value, depending upon the state laws.

A veteran can apply for a higher loan amount through VA loans than through the traditional Fannie Mae loans.


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