Which Mortgage Type Is Best for You?

Tuesday, April 12, 2016
Posted by admin under Mortgage Loans 

Which Type of Mortgage is Best for You?

As you prepare to purchase your first home, it's important to determine which mortgage type is right for you and choose one that has the most benefits. Some of your options are conventional, FHA, VA, and rural loans in Vermilion Co. Illinois. Here are some things that you should know about each one to determine which option is right for you.

Conventional Loan
 

A conventional loan is also called a conforming loan with most loans being sold to a GSE called Freddie Mac or Fannie Mae.   In order to qualify for this type of loan, you would need to have a minimum down payment of 5% of the purchase price; however, this can be a gift from a family member or significant other. It’s beneficial to pay 20% in order to avoid paying mortgage insurance, which is a small additional fee each month on your payment until you have equity of 80% in the home’s value.  
 

FHA Loan



A Federal Housing Administration loan is a major source for low to moderate income buyers and the loan is insured by the government.  FHA loans require 3.5% minimum for a down payment and this loan will require mortgage insurance which is an additional monthly fee added to your payment for the entire loan period.  The down payment can come from you or be gifted from a parent and the seller, if agreed upon, can pay for your closings costs.  There are maximum loan limits that change by location and this loan program generally requires a lower credit score than conventional; this makes it a great choice for qualified first home buyers.
 
Which Mortgage Type is Best for You?
 

USDA Loan
 

USDA and Rural Development (RD) loans are government-backed loans for eligible rural areas. There are income limits for these loans, but people with lower credit scores and no money for down payments are still eligible. The loans provide 100% financing for the purchase and if a seller pays closing costs there is no money required to purchase the new home.
 

VA Loan


 
Veterans, members of the Armed Services, and spouses of deceased veterans can apply for Veteran's Administration (VA) loans. Homebuyers with lower credit scores and no money for down payments can still apply for these loans. The loans provide 100% financing, and one of the benefits is there is no additional monthly fee for mortgage insurance payments.    
 
Which mortgage type is right for you? There are so many considerations with each loan that it is very important to schedule an appointment with your local lender to determine which program is right for you and your family.
 

Tagged rural loans  Mortgage types  USDA loan  0 Comments

Construction Loans: Financing a Home from the Ground Up

Tuesday, April 12, 2016
Posted by admin under Construction Loans 

Construction Loans: Financing a Home from the Ground Up
 
Construction loans are short-term loans used to cover the cost of building a new home. Some builders will take on the loan, but others require homeowners to cover the loan. If you’re considering construction loans in Vermilion Co. Illinois, here are some things that you should know about them.

Application Process



The application process for construction loans is slightly different than other types of home loans. It typically requires more time and documentation in order to complete it. Lenders want to review assets, wages, and debts for the borrower, as well as the finances of the builder before approving the loan. Most lenders also require at least 20% for the down payment before granting approval.

Types



There are generally 2 types of construction loans: single close or two-step loans. Single close loans cover the lot and the home. Two-step loans cover the lot and construction, but the homeowner needs to obtain a conventional loan for the home. Most lenders require a certificate of occupancy before granting the conventional loan. Construction loans last about 12 months unless the home is larger and more complicated. In that time, the homeowner needs to secure a permanent loan. Otherwise, they will be expected to pay fines or risk having the lender foreclose the property.
 
Construction Plans
 

How it Works



After getting approved for the loan, the borrower can withdraw money needed to cover the cost of materials and labor that has been completed. Along the way, the lender sends inspectors over to check out the progress of the home to ensure that it will finish on time. During this time, the borrower makes payments on the interest of the loan. Because it’s a short-term loan, interest rates tend to be higher than permanent mortgage loans. However, for individuals who choose a two-step loan, the conventional loan covers the rest of the construction loan.  

Insurance


 
Most lenders require title insurance similar to mortgage insurance. They also require builder’s risk insurance, which covers any damage that the contractors may cause. This includes things like fires caused by the construction process. Depending on where the lot is located, it may be necessary to purchase flood insurance, too. Speak with the lender to determine which types of insurance are required for the loan.

Before completing the application process for a new construction loan, it’s important to weigh the pros and cons. Make sure that this is the right type of loan for you. Shop around for the best interest rates and monthly payments, and read the fine print so you know exactly what is expected of you during the construction process and when paying off the loan.
 

Tagged Construction loan  Construction loan application  Residential construction loan  0 Comments