The decision to purchase a house isn’t always easy. It’s also a considerable financial investment. Homes are one of the most expensive items that people will ever own, so it’s okay to take all the time that you need until you’re ready to take that step.
Most home buyers aren’t able to buy their dream home with cash. That’s why they take out loans to finance the transaction. There are many different kinds of loans that are available today. Each of them has their own unique advantages, disadvantages and requirements.
Buying a home in Georgia can take time. There are certain steps that must be taken in order, and different people will become involved during specific stages. You could also run into unexpected problems or delays. Patience, persistence and proactive game plan can help you succeed. Here’s a brief overview of some of the most popular home loan options:
Here are a few things to know about home loans:
1. VA loans.
VA loans are backed by the U.S. Department of Veterans Affairs. They are available to active military members and their surviving spouses. There typically isn’t a minimum down payment required for this kind of loan. Mortgage insurance isn’t mandatory for VA loans.
To qualify, military members must have served during wartime for at least 90 consecutive days and at least 181 consecutive days during peacetime. Reserve or National Guard members are required to have served for either 90 days under Title 32 (with at least 30 of those days being consecutive) or more than six years of total service. Surviving spouses can apply for a VA home loan if their former partner passed away due to a service-related disability or in the line of duty. Most surviving spouses are typically not allowed to remarry to qualify for a VA loan in most instances.
Active service members must supply their lender with a statement of service. Your unit or adjunct commander or personnel officer should sign this document. Your birth date, Social Security number and full legal name should be included in the statement. The name of the commander who is supplying those details should be listed, along with the day that you started active service and any discharges or breaks that were taken from active duty. This document is also mandatory for active members of the Reserves or National Guard who are applying for VA home loans.
Discharged National Guard members should provide a Record of Service, Report of Separation and NGB Forms 22 and 23. Proof of character and service and Retirement Points Accounting may also be requested. Surviving spouses of former military members will need their spouse’s death certificate and DD Form 214 and their marriage certificate so that they can receive a Certificate of Eligibility. VA form 21P-534-ARE should be completed if the surviving spouse is getting regular dependency benefits.
Homes purchased through Veterans Administration loans must be the applicant’s main residence within at least 60 days after the residence has been acquired. Vacation, rental or investment homes can’t be bought with this kind of loan. There aren’t any specific credit score requirements, although they can vary from one lender to another. There aren’t any limits on the amount of money that can be borrowed, but the VA does have a cap on the dollar limit that will be guaranteed. VA mortgages have a loan limit of up to $548,250 in most areas if you default on the contract.
There are no down payment requirements for this kind of loan, but the house that you buy with this type of loan must be in a region that is classified as rural for your area. A credit score of 620 or higher is usually preferred for a USDA home loan.
2. FHA loans.
FHA loans are supported by the U.S. Federal Housing Administration. These government-backed loans are ideal for potential homeowners who may not be able to secure a down payment of at least 20 percent or who have less than perfect credit. Down payments for as low as 3.5 percent are available, and a credit score of 500 or better is usually required.
Most FHA loans also have mortgage insurance components. This type of insurance reduces risk for lenders. To qualify for this loan type, applicants must be attempting to buy property that will be their primary residence. FHA loans don’t apply to vacation homes, second homes or investments. An FHA approved appraiser will need to evaluate the house and a home inspection will also be required. Borrowers must also live in the respective home within at least 60 days after the sale has been completed.
The maximum amount that can be borrowed under a FHA loan is $970,800. A credit score of 580 or better is mandatory for an interest rate of 3.5 percent. A credit score of 500 or more is needed for a ten percent down payment.
3. USDA loans.
USDA loans are offered through the United States Department of Agriculture’s Rural Development program. They are intended for homes in rural areas. No down payment is typically required for this kind of home loan.
Grants and home improvement loans may also be available in your area. There aren’t any balloon payments, and borrowers usually take out a fixed rate loan to finance these purchases. Mortgage insurance is often required.
To qualify, your annual income can’t be 115 percent or more than the median income for that area. Lenders will look for a credit score of 640 or better. The house must be in what is considered a suburban or rural area. These areas typically have an overall population of around 20,000 people or less.
4. Traditional loans.
Traditional loans are provided by banks, credit unions and other lending institutions. Mortgages may be set for ten, fifteen or thirty year periods. Loan amounts, monthly payment amounts, interest rates and exact requirements will vary from one lender to the next.
You can schedule a meeting with the lender of your choice. They will review your income and credit history and also examine your current debt to income ratio. The less outstanding debt that you have, the more favorable you will appear.
If you are approved, the lender will supply you with a preapproval letter. This letter will state the amount and terms that they are willing to offer. It doesn’t guarantee that you’ll be able to buy the home that you’ve had your heart set on. However, it can give you a distinct advantage over other interested parties who haven’t secured their financing. A preapproval letter could even move you to the top of a seller’s list.
5. Jumbo loans.
Jumbo loans are only considered for larger purchases. They are sought after by people who want to either buy or refinance larger ticket homes. Jumbo loans also have more stringent requirements.
A credit score of 700 or better is usually needed. This loan type is used for properties with a list price that’s greater than $647,200. They can also be a riskier kind of loan, since they can’t be guaranteed by conventional or traditional lenders. Adjustable or fixed rates are applied to jumbo loans.
Borrowers may be asked for additional documentation when making a jumbo loan request. It’s not uncommon for them to provide bank statements, tax returns and other associated paperwork. The lender may also mandate a down payment of ten to twenty percent.
6. Conventional loans.
Conventional loans are available through companies such as Freddie Mac and Fannie Mae. These companies are sponsored by the government and allowed to offer loans to investors and individuals. Down payments can be as low as three percent for first time home buyers.
A down payment or 5 percent or more may be requested if you’re not a first time home buyer. A credit score of 620 or more is also needed. Private mortgage insurance will be necessary if your down payment is less than 20 percent.
You’ll be required to put at least 10 percent down if the loan is being used for a second home. Financing a multiple unit dwelling (not a single family house) will necessitate a down payment of at least 15 percent. A down payment of 5 percent is also mandated if you’re seeking an adjustable rate mortgage.
These are just some of the loan choices that you can make. Evaluate all possible loans carefully. Feel free to ask your lender any questions that you may have and read any and all loan documents very carefully before signing them.
Once you’ve been approved for a mortgage, it won’t be long until your dream of homeownership becomes a reality. At closing, all final paperwork will be signed and processed. The seller will get their payment for the net proceeds, and you’ll receive the keys to your new house! You can start looking forward to spending many great days in a wonderful place that you’ll be proud to call your own.
Have Questions? Ask The Kevin Pickles Team!
Your real estate agent is the best source of information about the local community and real estate topics. Give The Kevin Pickles Team a call today at (678) 887-1967 to learn more about local areas, discuss selling a house, or tour available homes for sale.