The Veterans Affairs (VA) loans are a great loan type for military personnel and veterans. These loans allow a borrower to finance 100% of the home they are buying and only need to pay for closing costs. It?s a government backed loan meaning that if the borrower defaults the bank is insured against any losses. This is a very popular loan type in our area due to the proximity of housing to many of the nearby bases and installations.
While 100% financing is very attractive there are some downsides to VA loans. You will not be able to buy a house that needs anything more than just small cosmetic work. Also, you will pay more money up-front in closing costs. However, some of these additional costs come from the funding fee that eliminates private mortgage insurance saving you money every month.
FHA loans are also government backed loans but they are provided by the Federal Housing Administration to assist first-time homebuyers. FHA loans only require the buyer to put 3.5% of the purchase price towards a downpayment. There are also FHA rehab loans (203k) that allow a buyer to roll repair costs into the loan amount instead of having to pay out of pocket. This is an attractive option especially for buyers looking at foreclosure properties.These loans also have less stringent credit score requirements than most other types meaning they are easier to qualify for.
Of course there are negatives to FHA loans as well. Except for rehab loans, homes must meet certain minimum standards and conditions in order for the government to back the loan. Also, similar to VA loans, there is an up-front funding fee that raises the closing costs paid at settlement. Unlike VA loans, FHA loans do still require private mortgage insurance to be paid monthly until the property has at least 20% equity.
Just a note here about interest rates and comparisons between lenders. Please ask the lenders for "Good Faith Estimate" If you are going to compare one against another, then fax or e-mail the estimates to me, and I will walk you through them and explain which one fits your needs the BEST!
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