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.

Qualified Mortgages and Its Impact on the VA Loan Borrowers

There’s a new type of loan called the ‘Qualified Mortgage’. Most of us have heard of it, especially prospective homebuyers who question the impact that it will have on their home mortgages. For example, retired or active duty military servicemen are speculating about the impact that these changes will have on their ability to get the benefits of a VA home loan.

The financial slowdown of 2008 led to the introduction of numerous stringent rules and regulations. This was done to put restrictions on giving away easy loans and to reduce the possibility of loan defaults. However, such restrictions have made life difficult for borrowers who are looking to buy a home. At the same time, the government has been implementing and modifying new mortgage policies to provide relief to these borrowers, and a Qualified Mortgage is one of them. There are some specific policies that have been implemented by certain U.S states. The perfect example would be the various programs and initiatives being taken by the government in Texas; especially its impact on the veteran home loan in Texas.

What is a Qualified Mortgage?
Qualified mortgages mainly focus on the safety and affordability of prospective homebuyers. During the 2000’s, many lenders provided mortgages to a large number of borrowers who had poor credit scores and who were not in the situation to pay back the loan. These subprime loans were the main reason that contributed to the financial meltdown and led to the collapse of the housing market.

The scenario mentioned above eventually led to the introduction of the qualified mortgage. The qualified mortgage does not have the risky features of other mortgages and it ensures that the borrowers can afford to repay the loans that have been sanctioned. Regulators have also laid down eight credit and underwriting requirements that must be met to obtain Qualified Mortgage status. Mortgage companies can still provide loans that do not meet the standards of a qualified mortgage, but those loans will not get protection as per this regulation.

The Effect on VA home loans
People who are worried about the impact that qualified mortgages will have on VA loans have a reason to smile. The good news is that it will not have much impact on the VA loans. These underwriting guidelines have been followed by most of the lenders over the years. Hence, no additional action needs to be taken to comply with these underwriting requirements.

In fact, VA loan borrowers will get some added advantages as it will limit the costs involved in obtaining a mortgage. It has been estimated that around 92% of the loans that have been taken out meet the requirements of a qualified mortgage. The other 8% of the loans either exceed or have a higher annual percentage rate (APR) than allowed. This shows that the new guidelines will not have much impact on a majority of home loans.

Qualifying For A VA Home Loan in Texas

Despite the Department of Veteran Affairs offering lucrative terms on home loans, not even 12% of military veterans have taken advantage of it. The primary reason for such low participation is that many veterans are unaware of the loan programs and if they qualify. Most have instead opted for loans offered by the Federal Housing Administration (FHA). However, with the sharp increase in mortgage insurance premiums on FHA loans in 2014, the demand for VA loans has risen.

To apply for a VA Loan you will have served in the Army, Navy, Air Force, Marines, National Guard or Coast Guard for a minimum of 90 days. Additionally, for VA Loans in Texas, you must meet the following criteria:

• You are an active military serviceman looking for a permanent change of station (PCS) to Texas
• You are an active military person and already living in Texas
• You had a home in Texas when you entered the military
• You had a home in Texas when you left the military
• Your home has been in Texas for at least a single day
• You intend to use the home as the primary residence

If you satisfy the above criteria, you may be eligible to apply for a VA home loan. If you are retired, be ready with your DD214 Form to apply for the loan. If you are an active military person, a statement of service will be needed to start the application process.


If you are a veteran, you deserve all of the benefits a VA Loan has to offer. Contact one of our VA Loan experts today to learn more.

Source: http://davidsongroup.net/mortgagepedia/posts/qualifying-va-home-loan-texas/

More to VA Loans Than Competitive Loan Rates

The advantage of taking out a Veteran Affairs (VA) loan is quite far reaching. The main purpose of this loan is to make life easier for active duty or retired military personnel. That is why lucrative benefits are offered to them through this program, which includes providing a guaranty on loans of up to 100% value of the property that they choose to buy. Even the funding fee from 0% to 3.15% that may be required for this loan can be financed by the Department of Veteran’s Affairs. This mortgage also provides another key benefit of zero down payment. Also, in terms of interest rates, among all the states VA loan rates in Texas are lower due to the support provided by the state.

There are some conditions to fulfil in order to get financing for a home loan under the VA mortgage program. The price of the house should not be more than the reasonable value as assessed by the department. So, the down payment will be waived only if the sale price of the house does not exceed the appraised value. However, unlike the FHA loan offered to other citizens, the veterans are not required to pay monthly insurance premiums.

Some other benefits of taking out VA loans include limiting closing costs, having a provision to allow sellers to pay closing costs, no prepayment penalty for early loan payoff and the guaranty provided by the VA department if borrowers find it difficult to make payments.

We at the Davidson Group can assist you with your VA loan needs. Our experienced loan officers can walk you through your options, and manage the complicated paperwork and official proceedings on your behalf. Over the years, we have helped hundreds of active-duty and retired military professional. We believe our veterans deserve the highest respect.

Source:  http://davidsongroup.net/mortgagepedia/posts/more-va-loans-competitive-loan-rates/