- Q) What kinds of loans are there for home buyers?
There is few kinds of loans. And actually there is more and more, as housing market gets stronger with every month.
But you will most likely receive FHA, VA or Conventional loan.
FHA- If you are buying your first home…just starting and you don”t have substantial amount for down payment, this would be great loan for you.
Pros? You are required to bring down payment of only 3.5% of the purchase price. Also, seller can pay up to 6% of the purchase price toward your closing costs. If you are purchasing home priced at $100,000 or more, that should cover almost everything.
Cons? 6% is not going to do you a lot of good if home will not appraise. Let’s say purchase price is $100,000 and seller will not accept one cent less. In order to get your closing costs paid by seller, you would have to rise price to $106,000.
Here comes another con. FHA appraisals are much more strict than in conventional loan. One of the reasons? Bank/government (FHA loan is insured by government, so if you stop making payments, your lender will get paid ) is a lot more careful, because they are lending you majority of the value. Also there are standards as to condition of the home (health and safety) that appraiser checks.
There is mortgage insurance that you have to pay every month.On $100,000 house it would be between $50 and $100 per month . This insurance never goes away.
It is also much longer process (45 to 60 days).
Unfortunately sellers know of those cons and you will see a lot of homes for sale in which homeowners note: no FHA.
Ask questions…Chose wisely…