Due to this worldwide pandemic, we are seeing a dramatic change in the economy. The stock market has been affected and rates have declined. So, what exactly does that mean for you? If you are in the market to buy your dream home then there is no better time to buy than right now. With interest rates at an all-time low, you could financially benefit from a low-interest mortgage.
So, to help you get started on the mortgage application process, your local Green Cove Springs contractors with A&M Home Builders have listed the key differences between three of the most common mortgages, an FHA, VA, and Conventional loan.
An FHA Loan is administered through the Federal Housing Administration and is for those with a low-to-moderate income. An FHA loan has a low credit score requirement of only 500 and you can pay as little as 3.5% on your down payment. These minimum requirements make this loan popular amongst first-time homebuyers. However, if you pay less than 20% of your down payment, you will be required to pay for private mortgage insurance (PMI). This is an additional fee that protects your lender in case you were to default on your payments.
The amortization period for an FHA loan is typically 15 or 30 years and you could still qualify for an FHA loan if you have filed for bankruptcy or foreclosure in the past.
A VA Loan is issued through the United States Department of Veteran Affairs and is for those who have served in the active military, Reservists, or the National Guard. This loan has a 0% down payment requirement and does not have a specific credit score requirement. Another benefit of a VA loan is that you do not have to pay private mortgage insurance even if you pay below 20% towards your down payment.
To qualify you must have served at least 90 consecutive days of active duty during wartime or a minimum of 181 consecutive days during peacetime. If you are in the Reserves or National Guard, there is a minimum six-year requirement to qualify.
Unlike an FHA or VA loan, a conventional loan is not backed by the government, which means there are generally stricter requirements to qualify, however, you may be able to borrow a larger sum of money.
During the application process, you will need to submit important financial documentation such as your current credit score, proof of income, debts & assets, credit history, employment verification, and a mortgage application.
To qualify, you will need a minimum credit score requirement of 680 and a debt-to-income ratio of approximately 36%. You will also be required to pay a minimum of 20% towards your down payment so be sure and have a substantial amount of savings before you begin the application process.
If you would like to receive additional information on an FHA, VA, or Conventional loan, please contact your local Green Cove Springs contractor with A&M Home Builders at 904.955.1758 or email Joshua@amhomebuilders.com.