What are main mortgage types?
A home purchase loan is a loan that assists you in securing funding for the purchase of a residential property. Of course, there is more to understanding the home purchase loan process than simply finding a home, making an offer and closing the deal. Whether you are planning to purchase your first home or have gone through the process before, the fact is, the task of securing funding for your home can become a daunting and confusing task. Certainly, it is always advised that you speak with a lender or one of the many specialized organizations (many non-profit) to get detailed information specific to your situation. However, below we have included a bit of information to get you on your way to finding and securing your very own home purchase loan.
The first step to securing funding for your home purchase loan is to get prequalified. Getting pre-qualified for a loan is critical in today’s real estate environment. By going through the loan process prior to signing a purchase contract on a home, you can eliminate the obstacles without jeopardizing the transaction. Once your loan is approved, your home purchase loan closing will move swiftly and require only a satisfactory appraisal and title report on the home. However, before your loan application can be underwritten, you will need to provide certain personal documentation. Theses documents include:
• W-2 forms
• Pay stubs
• Bank statements
• Investment statements
• Tax returns
• Telephone numbers and addresses of your workplace
• Information on other property you own
Before your loan can be placed into Escrow, you will also need to provide information about the property you plan to purchase. This information includes:
• Purchase contract
• Planned unit development
• Name of development or project
• Phone number of the homeowner’s association
• New construction
• Year the land or lot was acquired
• Original cost of land
• Amount of liens
• Estimated cost of construction
Next, a qualified appraiser will look over the property and submit a report to your mortgage agent. This allows lenders to determine if the home is worth enough to support the loan. Finally, once a mortgage consultant approves your loan, it should be determine whether you will lock your rate with the mortgage lender. Locking in your rate ensures that your interest rate will not increase before you close your loan.
Types of Home Purchase Loans:
• Conventional Loans — For mortgage borrowers with excellent credit and a substantial down payment. A credit score driven home loan, Conventional home purchase loans often require a FICO score of 620 or better. Conventional loan guidelines are written so that a borrower with a 740 credit score (or higher) can obtain the best interest rate possible. As a borrowers credit score decreases below 740, fees and rate increases may be added.
• FHA Loans — For borrowers with less than perfect credit and a small down payment
Not typically credit score driven, FHA new home purchase loans generally require a 620 FICO score or higher to obtain approval. However, as long as the borrower has recovered from circumstances that had caused the damage to their credit, they will usually be eligible for this type mortgage loan.
• USDA Loans — For borrowers who have less than perfect credit and a no down payment These loans require no down payment. Other loan programs do not allow this. A FICO score of 620 is usually required to obtain a USDA loan.
• VA Loans — For Veterans of the U.S. Armed Services. VA Loans are for U.S. service members and, generally, require no down payment or mortgage insurance. Again, a 620 FICO score is usually required to qualify for a VA loan.