House Down Payment and its Types: A Concise Guide

Purchasing a house is not about driving on a Sunday afternoon, visiting random open houses that fall on your way, and finalizing a deal with the owner. Rather, it is about putting your finances in order and ensuring you have enough down payment. In the case of people looking for VA approved lenders, or seeking a USDA home loan program, the scene is different--no down payment. There are others, however, who depend on conventional and other loans when it comes to mortgaging a house. This article focuses on downpayment and how much of it you may need while buying your new house.

Understanding Down Payment
Anything that goes out of your pocket, which you do not or are unable to finance as a loan is your down payment. It is important to not confuse this amount with earnest money deposit or EMD, which most starters do. The reason, earnest money deposit is the amount required to secure your home’s purchase contract. It is only a part of your down payment that reflects your good intentions towards mortgage. Consequently, this amount is, usually, at risk when you default your payment.

Exploring Down Payment Types
How much downpayment you are required to pay to your lender depends on the type of your mortgage loan. These days, 80/20 combo loans and liar loans are hard to find, as lenders are more focused on closely scrutinizing your borrowing ability before landing into a deal. To be in a safer position, they want you to pay a good amount of down payment. Still many minimum down payment options exist:

VA Loans Down Payment
Designed for American veterans to help their dream of owning a house, va loans give you the option of zero down payment. The rate of interest is lower than conventional loans, but there is a funding fee involved that varies from 2.5 to 3.3%.

FHA Loan Down payment
Most conventional loans come with a fixed-rate mortgage, meaning your monthly payment or installment remains fixed and does not change as per the rate of interest. Though lenders do not finance 100% of your house loan, a good FICO score may get you a loan for up to 95% of house’s value.

Conventional Loan Down payment
A part of the American mortgage system since 1934, FHA loans, usually, carry a down payment of 3.5%. They may also accompany a mortgage insurance premium into the loan.

Things to Remember:

• Most lenders do not offer 100% financing, as they want borrowers to have some skin in the contract
• Home buyers have to bear other out-of-pocket expenses apart from down payment such as closing costs
• Closing costs are fees charged by lenders and third parties at the time of closing mortgage
• In most cases, buyers have to pay for closing costs, except a few such as VA loans where the lenders bear a portion of it

Conclusion
Going the conventional way, it is always better to pay as much down payment as you can. However, do not do the mistake of wiping out your savings account completely, and save some for the rainy days too. If you do not understand the intricacies of any mortgage type or do not have time to do so, better take the help of a loan officer. Tied to banks, credit unions and other financial institutions, loan officers have both the expertise and knowledge to help you choose the right mortgage plan that works best for you and your family.

VA Home Loans-Ensuring Homes for Veterans in the US

VA loans are home loans available to the veterans of US army. These loans were first approved in 1944, under the guidance of President Roosevelt. Since then, they have benefitted millions of veterans and given them a chance at homeownership and a secure family life.

VA Home Loans: Making Home Ownership a Possibility for Veterans
Every state in the US accommodates the veterans by offering various benefits like easy home loans and special rehabilitation programs including the state of Texas. VA home loans are easily available for them through government as well as VA approved private lenders.

Taking note of the various problems that veterans face such as bankruptcy and poor credit scores, the department of Veteran Affairs designed the rules and regulations for VA loans in such a manner  that it is very easy to qualify for them as compared to other types of loans.

What  makes VA Loans Easier than Others?
1. Zero down payment
2. Easy repayment plans
3. Loan amount upto 100 percent of property value
4. Penalty Free Prepay System
5. Flexible interest rates

As mentioned before, the government policies are very lenient about the VA home loans and there are just a few pointers that decide the qualification of a veteran.

Honorable Discharge
VA home loans’ primary criteria is that a veteran applying for it must be  honorably discharged from the armed forces. Rest all the qualifying criteria such as credit scores, down payment and EMI, are flexible and have easy clause attached to them that makes almost every veteran eligible for a VA loan and also for refinance  of VA loan.

Time Service Record
A veteran who has served before 1980, has to show a war time service record of 90 days to qualify for the loan whereas those  who joined and served post  1981 have to show the service record of 2 years. Anyone below this time limit also qualifies, if the reason behind their discharge is service related disability.

Conclusion
So, this is how easy it is for veterans to qualify for a zero down payment in the state of Texas. VA home loan is definitely the reform that has benefited millions of veterans in the US since 1944.

Why Choose a VA Home Loan?

When it comes to home ownership, everyone wants to put in their best effort to find the best deal. Aspiring home buyers are always on the lookout for ways to make the most out of their investment. This includes obtaining a home mortgage loan at the best possible terms.

For example, VA home loans in Texas are a preferred option for veterans in the region. These mortgages are guaranteed by the US Department of Veterans’ Affairs. VA mortgages are in place to help veterans of the American armed services or their qualifying spouses benefit from long-term financing to buy their own home.

Let’s talk about why a VA loan is the best mortgage option for those who qualify:

One of the best features of a VA loan is that it offers 100% financing. While in the current lending environment, it’s very tough to get a loan without a down payment. These loans help qualifying buyers purchase their home without making a down payment. Some FHA loans come with the lower down payment option of 3.5%, but even this figure may be unattainable for some buyers.

When opting for a VA home loan in Texas, buyers are able to free themselves from having to pay for Private Mortgage Insurance (PMI). This is because VA loans are backed by the federal government. This means huge savings for home buyers, which could amount to 0.5% to 1% of the complete loan amount on an annual basis.

Relaxed credit requirements are another highlight of VA loans. Potential buyers with less than perfect credit scores may qualify for these loans. Most VA lenders ask for a credit score of 620, which is a blessing for military home buyers. Moreover, the interest rates fluctuate based on the market and individual borrowers, and they may even fall below conventional loan rates.

Last but not the least, VA loans come with no prepayment penalty. In some cases, paying off a conventional home loan within the first five years may cause you to incur a prepayment penalty equal to about 6 months of interest. VA loan borrowers don’t have to deal with any such penalty, which makes these loans even more of a lucrative option.

In case you think that you might qualify for a VA loan, get in touch with a reputed lender in your area; someone who has rich experience in this domain. The right guidance from a VA approved lender can take you closer to home ownership.