Financing Guides
Single Family Home Loan Guide
If you’re looking to finance a home, purchasing a single family home will provide more financing options than other property types. Single family homes are financeable through the widest variety of government-backed and conventional loan products. Depending on your situation, you may opt for a 15 or 30 year loan term. You will need to choose between a fixed-rate or adjustable-rate mortgage. If you are looking for a home that is listed above the conforming loan limit in your area, you will need to apply for a jumbo loan. As you can see, you will have a lot of important decisions ahead. Let’s take a closer look at your options.
Conventional Home Loans
A conventional loan is originated in the private sector and is not insured by the government. Conventional loans are more difficult to qualify for than government-insured loans because they pose a greater risk to the lender. A credit score of 620 and a debt-to-income ratio of 50% or less is generally required, but requirements do fluctuate. Most homebuyers that can meet these credit requirements opt for conventional loan products because they offer very competitive interest rates. Another perk is being able to avoid private mortgage insurance with a 20% down payment.
- Conventional loans offer 3% down payment options, with some lenders allowing qualified buyers to purchase with 0% down.
- Down payment requirements vary depending on lender guidelines and borrower qualifications.
- Second home purchases typically require a minimum 10% down payment.
- Adjustable-rate mortgages usually require at least 5% down payment.
- Renovation financing options are available with a minimum 5% down payment.
- HomeStyle Renovation Financing and Freddie Mac ChoiceRenovation are options for homes needing major renovations.
FHA Loans
FHA stands for Federal Housing Administration .
FHA loans are backed by the government. This government insurance mitigates the lender’s risk; as a result, FHA financing is easier to qualify for than conventional financing in terms of credit scores and loan-to-income ratios.
The minimum down payment is as low as 3.5%. In the past, this low down payment made FHA financing attractive to buyers with little savings. Nowadays conventional financing is available for only 3% down. So in most cases, buyers select FHA because they have difficulty qualifying for a conventional loan.
The downside to FHA loans is the upfront mortgage insurance premium (MIP). MIP covers a percentage of the lender’s loss if you default on your loan. FHA borrowers don’t receive any protection from MIP policies, but they are responsible for monthly premiums for the life of the loan.
Typically they pay two different kinds of mortgage insurance premiums:
- The upfront premium is approximately 1.75% of the loan amount.
- Annual premium of 0.85% for most borrowers (sometimes more).
VA Loans
- Available to active or retired military (or a veteran’s surviving spouse).
- 0% down payment.
- he VA only allows lenders to charge 1% maximum to cover the costs of originating and underwriting the loan, so you save money at closing. There is, however, an additional upfront, one-time funding fee of 2.15%.
- No mortgage insurance.
USDA Loans
U.S. Department of Agriculture & Rural Development
Smart home elements, energy efficiency, equestrian amenities, garages that store multiple vehicles, and private docks with boat lifts are additional notable features. While there are common luxury home features in Florida, there is great diversity and creativity in our luxury market.
- Limited-income homebuyers in towns with populations of 10,000 or less, or that are “rural in character,” meaning that some areas that now have bigger populations are grandfathered in.
- Lower interest rates than non-USDA loans.
- Down payments can be as low as 0%.
- Lenient credit score requirements.
- Upfront mortgage insurance fee of 1% of the loan amount and an annual mortgage insurance premium of 0.35%.
