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.

Can the Missed Payments in the Past affect your VA Eligibility?

VA loans have gained in popularity in recent years. According to a report by The Huffington Post, the Department of Veteran Affairs backed 630,000 mortgages for veterans and military personnel in 2013. Unique features and unmatched buying power make VA loans a preferred choice among military personnel.

VA approved lenders can help veterans understand the specifications including the eligibility criteria to obtain a mortgage. They can assist borrowers to find the right property, and also negotiate the purchase agreement. However, when veterans apply for a VA loan, lenders will analyze their past credit performance in order to determine whether or not to approve a loan. A borrower who has a history of making timely payments is considered safe. On the contrary, a borrower with a history of slow payments and delinquent accounts may find it difficult to get a loan approval. Here are some of the factors that are considered when you apply for a VA loan:

• Late Payments

When you apply for a VA loan, the underwriter will analyze your past credit behavior. A borrower who has faced some financial difficulties for a specific time period, but has maintained a good payment history, will not be disqualified for a VA loan. If you make regular and timely payments for 12 months after the date of your last defaulted payment, then the lenders consider that your credit has been re-established.

• Credit History

When it comes to VA loans, the absence of established credit history will not disqualify you from getting a mortgage. A satisfactory history of payments is preferred as it helps establish a positive credit history.

• Unpaid Judgment

If a borrower has an unpaid judgment, then his mortgage will not be approved. However, a borrower who is on a repayment plan and has an acceptable payment history may be approved for a loan.

• Foreclosure

A borrower whose previous residence was foreclosed within the last two years from the disposition date is not eligible to get a VA loan. If the foreclosure was on a VA loan, then the applicant may not have full entitlement that is available for the new loan.

According to the rules laid down for a VA loan, a borrower can’t be disqualified for missed payments during a period of financial crisis. However, in such situations, a borrower will have to provide relevant proof to show that the circumstances were beyond their control. The applicant is also required to submit a proof to confirm that the situation has been resolved.

All About VA Loans and How You Can Apply for Them

Do you often hear about VA loans and are you interested in learning what they’re all about? To begin with, a VA loan is a mortgage whose guarantee is given by the United States Department of Veterans Affairs. VA loans are meant to offer long-term financing to veterans who have worked in the American armed services or their spouses whose partners lost their lives in a service-related cause. Those who are eligible for this loan can apply for it. They can go for this loan even when they fail to get private financing. One of the major USP’s of this loan is that a borrower doesn’t have to make a down payment.

Let suppose that you are a resident of Texas. Before you go looking here and there to secure a loan, you must know that VA loans in Texas are made available to eligible and qualified veterans through direct lenders, mortgage brokers and banks. As far as the interest charged on a VA loan, it can be similar to that which is charged in a conventional mortgage.

To secure a VA loan, you need to follow certain steps. First and foremost, you must become pre-qualified to purchase a home or get a loan refinanced. For this, you have to get a pre-approval letter before you make an offer on a home. If you are buying a home and not getting a loan refinanced, you can go for a house whose closing costs don’t exceed 4% of the total amount and can be incorporated in the contract.

For a formal loan application, you will be required to furnish a copy of your purchase contract and there will be other disclosures that will require your signature. In the end, as you show some personal documents, your loan should be approved. Post the approval of your loan, you can go ahead and start closing on your new house. What will happen in the end is that you will again be signing some final loan documents and the purchase transaction as well as the transfer of ownership will be finalized. Then your new home will be all yours.

Determining Eligibility for Texas Veteran’s Home Loans

Texas veterans home loans offer the military veterans in Texas an opportunity to own a home. The best thing about these loans is the fact that veterans don’t need to make a down payment. Also, they can receive up to 103.15% of the sale price of the property as a loan. Out of this 3.15% includes the funding fee that can be financed with the total loan amount. In order to qualify for such loans, veterans need to fulfill certain conditions.

When you choose to apply for a mortgage, the best decision you can make is to consult a respected mortgage company with qualified loan officers who can evaluate your current financial condition, assist you in understanding various loan programs and apply for a loan. They can also assist you in finding a qualified real estate agent.

When working with a loan officer on a home mortgage, they will help you through the requirements process, including proof of service and income. Here are some of the documentation requirements for veterans home loans:

1. Certificate of Release or Discharge (DD214): This form is available for retired veterans, reservists and those serving in the National Guard. The form is proof of discharge from active duty. A loan officer can assist you in filling out this form and submitting it to the lender who can help you get approved for a VA mortgage so you can begin the process of owning a home.

2. Certificate of Eligibility (COE): You will need this when applying for a loan. You can get a COE from the VA or your mortgage company can assist you in obtaining one. This certificate ensures that you meet the minimum VA loan standards.

3. Statement of Service: Active duty service members need to submit this document. This document is evidence of their active service that specifies the start date of their duty and their end date. This contains the signature of a senior officer.

Especially for Texas, there are specific mortgage programs for veterans such as the Texas Veterans Land Program being offered by the Texas Veterans Land Board. A leading company in the state assists you in choosing the best Texas veterans home loans. These experts can help you determine the best and most affordable price range based on interest rates and other costs. This is especially for veterans who have financial constraints. The mortgage company will walk you through the entire process and ensure that you make an informed decision.

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/

Buying your First Home? Check out the types of Loans you can get

Do you think that it’s time to realize your dream of buying your first home?

It’s the dream that every American has, but low cash reserves and a strict lending market make things difficult. Especially, when the economy has been low and is hardly showing signs of recovery.

There are recent updates on stricter loan requirements for 2014. These new rules will be more tied to the borrowers’ debt-to-income ratio.

Types of Loans to explore
Despite all the odds stacked against borrowers, you needn’t put off your plans just yet. There are various loan options available that will fit your requirements. But prior to that, let’s know about the major loan types and their eligibilities.

Usually, there are two major types of home loans, conventional and government.

1. Conventional Home Loans

Conventional loans are given by banks, private lenders or mortgage companies. The interest rates of these loans are based on the current market trend. The following types of loans are available:

Fixed-rate Mortgage: In this type of loan, the rate of interest remains fixed. Borrowers pay a fixed mortgage amount as repayment on a monthly basis, and the interest rates don’t vary with the changing market rates. However, the interest rates of this loan are comparatively higher than FHA, VA or USDA. Also, the guidelines are more stringent in terms of debt-to-income ratio and credit score.

Adjustable-rate Mortgage (ARM): An adjustable-rate mortgage initially offers a fixed interest rate, and later the rates become adjustable based on the current interest rates in the market. However, the rate during the adjustable period is uncertain, and borrowers may end up paying steep interest on their loans due to market adjustments.

Other or Jumbo Mortgages: Borrowers who don’t have good credit scores can get these types of loans. Such loans have a higher credit limit than the more typical ones. At the same time, jumbo loans have more risks involved because if borrowers default in payment, they will have a significantly higher amount payable than on other loans. Hence, these loans require a higher down payment.

2. Government Home Loans

These loans are guaranteed by the government for people who find it difficult to obtain conventional loans due to strict eligibility issues. Various types of these loans are mentioned below:

Federal Housing Administration (FHA) Loan: This is a program initiated by the U.S Federal Housing Administration (FHA). The objective of this program is to help more families and individuals with low income to afford home loans. Interest rates of these loans are lower than the conventional loans. However, total interest rates and fees are higher in FHA loans.

Veteran Affairs (VA) Loan: VA loans are offered by the US Department of Veteran Affairs to veterans of armed services, or to their families, for obtaining long-term financing. It’s a good option for borrowers who are not eligible to receive private financing, as they can buy a home without making a down payment.

USDA Loan:

This loan program is offered by the US Department of Agriculture (USDA). These loans are guaranteed by the Government and no down payment needs to be made. USDA loans are structured to be repaid over a period of 30 years.

Getting a home loan is an important step towards fulfilling a lifelong dream. Hence, you need to do your own research to find a lender that has extensive knowledge and expertise to guide you in every step. Despite borrowers not meeting eligibility criteria for conventional lending, a reputed lender can educate and assist them in getting home loans through a structured process.