Home financing translated into English that a normal person can understand…
Getting a mortgage and financing a home can feel like an intimidating journey – The rules seem scary; the process appears to be lengthy; and the language used sounds Greek to most people. But it does not have to be frightening, long, or confusing. Take a couple of easy steps, and learn a couple of simple terms, and work with the right people and the whole deal can be quite painless!
The initial steps you need to take are these: 1) Find a good, honest, well-trained Realtor that you are comfortable working with. 2) Ask that Realtor for contact information for 3 or 4 lenders he or she recommends. And, 3) Sit down with the lender you choose and discuss your options.
Here is where it could become confusing – VA, FHA, Conventional, AEOA, Minnesota Housing, Rural Development, First Time Home Buyer, Fixed Rate, Variable Rate…..Just reading all this probably gives you a headache.
BUT, a good lender will be able to guide you, and over the next few days I intend to cover the basics behind the types of financing you are most likely to hear about from your lender so that you have just enough background to be comfortable.
The Federal Housing Administration (FHA) is an arm of the Department of Housing and Urban Development with the primary purpose of encouraging home ownership in the U.S. Major advantages of this type of financing are: A low down payment (3.5%); Buyers can often get approval even with thin credit or problems with credit history; and it is relatively easy to use gift money toward a down payment.
The major drawbacks of FHA are that mortgage insurance raises your monthly payments and often cannot ever be cancelled, and the rules an FHA appraiser must follow are more strict than on conventional loans. The rule of thumb is that the FHA is easier on the buyer and tougher on the home….
There are many factors to consider in choosing home financing that your lender can help you to navigate. FHA loans are not the best option for everyone or every situation, but they are perfect in many cases for many people.
Coming next, VA Loans…