The Veterans Administration (VA) will guarantee certain owneroccupied residential loans made by banks or other lenders. Investors and flippers need not apply. The guarantee is limited to qualified veterans, up to a maximum guarantee amount of US Dollars 50,750. The Veterans Administration does not actually loan the money directly. Most lenders require that the VA guarantee, along with a down payment from the buyer, equal at least 25% of the value - or purchase price, whichever is less - of the home. The eligibility rules for length of service are rather complicated and range from ninety days to six years, depending on the circumstances, timing, whether it is war time or peace time, and the borrower's status as active duty, member of the National Guard, etc. For more information, contact the Veterans Administration.
With a VA guarantee, lenders can approve somewhat riskier loans at lower interest rates and with little or no down payment. In addition, borrowers can qualify, even though up to 41% of their income is used for debt service. This is higher than typical underwriting requirements for non-VA loans. The borrower must live in the home and not use it for rental income, be a satisfactory credit risk (under lenient VA guidelines), and have a stable source of income. In order to obtain the guarantee, the veteran will usually have to pay a 2% fee, and eligible Reserve/National Guard members will have to pay a 2.75% fee.
These fees can be reduced by paying a down payment; any lender or broker can help you with the details. You will need a Certificate of Eligibility to qualify for a VA guarantee. If you do not already have one, it can be obtained from your local VA office by completing VA Form 26-1880, Request for a Certificate of Eligibility. You will also need a VA appraisal, called a certificate of reasonable value (CRV). The lender usually orders one. Otherwise, the process is pretty much the same as it is for any other loan, except that you must advise your lender that you want a VA guarantee.
Yes, but only if you plan to occupy the property as your principal residence. The Federal Housing Administration (FHA) is a part of the Department of Housing and Urban Development (HUD). The FHA has a goal of increasing homeownership among low-income and middle-income Americans. To encourage it, the FHA insures certain loans made by lenders. The FHA does not make any loans itself. Because of the insurance, however, lenders are able to stretch a bit and loan money to people who might not otherwise qualify. These loans are not limited to borrowers with credit problems or low income, but they do assist those who might otherwise not be able to obtain financing. Starting with loans made on or after January 1, 2008, the borrower-paid insurance premium will depend on your credit score. The lower your credit score, the more you will pay to obtain the FHA insurance.
If there are financial blemishes in your life, the following are the requirements in addition to paying the insurance premium. Qualified borrowers must have been discharged from bankruptcy at least two years earlie plan for at least twelve months, or had a foreclosure no more recently than three years earlier. All judgments must have been paid in full before closing, but collections accounts do not have to be paid if you have mitigating factors (a good excuse). Usually, you must have a history of four or more creditors with regular payments on your credit report. If you do not have that many, you can use evidence of timely rent payments, utilities, or car insurance.
The required down payment on an FHA-insured loan is usually only 3%, and the money can be a gift from someone else. There is an exception for homeowners who lost their property in regions declared a federal disaster area by the president. Those borrowers can obtain 100% financing. Disaster victims do not have to buy property in the same area; they can relocate, if they want.
A wide variety of websites have online financial calculators that let you input your loan amount, interest rate, and loan term. The calculator will tell you what your monthly payments will be. I can recommend BankRate and the AOL web page.
If you do not always have easy access to the Internet, you can do the same calculations in Microsoft Excel. Create a spreadsheet. Column A has the information you will enter on your spreadsheet for each row. You must enter the information in exactly the order described; otherwise, you will not arrive at the right monthly payment.
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Note: This article was sent to us by: Nathaniel D. Wadross at 06262010
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