My friend Maryellen at KMG Mortgage Group posted this great information on different types of loans. I don't think there has EVER been a better time to be a buyer than right now! If you are a fence sitter, consider jumping down and taking advantage of the many opportunities available to buyers right now.
Government Loans v. Conventional Loans
Which is best for you?My Community Mortgage and Flex 97/100 are conventional loan alternatives (offered via Fannie Mae and Freddie Mac) to government loan programs such as VA, USDA and FHA.
Generally speaking, KMG Mortgage Group prefers to put borrowers into the corresponding government loan program, if the borrower and property qualify for them.
Why? There are several reasons, but here are just a few:
1) Underwriting guidelines:
Government loan programs are more flexible in terms of underwriting guidelines than conventional loans. While conventional loans rely almost exclusively on historical statistics to project whether or not a borrower is a high risk, government loans recognize that each borrower is an individual with unique situations and circumstances. In the industry it is often referred to as "common sense" underwriting.
2) Private Mortgage Insurance:
Government loans do not require Private Mortgage Insurance (PMI). While VA and USDA loans do require a "Funding Fee" and FHA requires "Up Front Mortgage Insurance", these are typically VASTLY more affordable than Private Mortgage Insurance (PMI) -- which is offered by insurance companies looking to turn a profit and are accountable to their shareholders.
3) Interest Rates:
Interest rates on government loans are often more competitive than those of conventional loans. Conventional loans tier interest rates and swing widely on a number of factors such as loan-to-value and credit score.
Loan
to ValueConventional Loan Program
Government Loan Alternative
Why one versus the other?
100%
My
Community
Mortgage
100Flex 100
VA or USDA
If borrower is neither a Veteran (VA) nor live in a rural qualifying area (USDA) and requires 100% financing, MCM and Flex 100 is an option.
However, please read note about FHA below...
97%
My
Community
Mortgage
97Flex 97
FHA
Generally, FHA loans require 3% contribution of the borrower's own funds. HOWEVER! Per FHA guidelines, the 3% can be gifted and the seller can contribute up to 6% of the sales price toward closing costs.
In other words, it is possible to get into a house using FHA financing with $0 out of pocket.
And, unlike USDA loans (which are limited in their geographic scope) and VA loans (which are limited to current or past military personnel), FHA loans are accepted everywhere!
Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com
Janna Rankin Scharf provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.
No matter how grand or modest your real estate dreams may be, you can turn to me in confidence. Give me a call today and let me know what I can do to be of service to you!
Janna Rankin Scharf AB, GRI, CSP, CNS, CLHMS 208.651.9700
Hi Janna, Very good information, thanks for passing it on! I appreciate it!
Janna, great information, how interesting a short while back no one would give the time of day to a VA or an FHA loan...now they are the only game in town.