Our team is here to assist our buyers in all different types of financing. We also have a list of recommended lenders we can provide. Here is a list of the most popular types of loans we come across:
CONVENTIONAL LOANS
FHA LOANS
VA LOANS
USDA LOANS
IDAHO HOUSING LOANS
For additional information on LAND/LOT LOANS or CONSTRUCTION LOANS please contact us directly as there are multiple variations of these types of loans.
Conventional Loans:
A conventional loan is a mortgage loan that’s not backed by a government agency. These loans come in all shapes and sizes and the most popular type of home loan. They are originated, backed and serviced by private mortgage lenders like banks, credit unions and other financial institutions unlike FHA and VA loans.
Here are some general characteristics to know:
• Credit score: It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.
• Down payment requirement: You can find conventional mortgage loans with a down payment requirement as low as 3%, and some lenders have special programs that offer up to 100% financing. However, if you don’t put down 20% or more, the lender typically requires you to pay private mortgage insurance.
• Loan amounts: Conforming conventional loans go as high as $726,200 for single-family homes in 2023 in most counties in Idaho. If you want a bigger loan than that, you’ll need a jumbo loan.
• Loan terms: Conventional loans are typically repaid over a 30-year term, but it’s possible to qualify for a 15- or 20-year conventional mortgage loan. We recommend at 15-year loan if at all possible.
• Interest rates: You can get a fixed-rate loan or an adjustable-rate loan. Your interest rate will largely depend on your credit score and overall credit history. The better your credit is, the less you’ll pay in interest over the life of the loan.
Types of Conventional Loans:
There are several types of conventional loans that you may come across as you compare lenders and mortgage options. Here are some of the most common ones and how they work.
• Conforming conventional loans: Conforming conventional loans are loans that adhere to the standards set by Fannie Mae and Freddie Mac, including maximum loan amounts discussed above. A fixed-rate mortgage loan has the same interest rate—and, therefore, the same monthly payment—throughout the life of the loan.
• Jumbo loans: Jumbo loans allow you to borrow more than the maximum lending limit for conforming loans. However, they typically require a higher credit score, lower debt-to-income ratio (DTI) and larger down payment.
• Adjustable-rate loans: With an adjustable-rate mortgage you’ll get a fixed interest rate for a set period, typically between three and 10 years. After that, your interest rate can adjust each year based on the current market rates.
Advantages of Conventional Loans:
There’s no right mortgage loan for everyone, so it’s important to know both the benefits and drawbacks of each of your options before you choose. Here are some of the benefits you’ll get from a conventional loan:
• Low costs: A high credit score can help you qualify for a low interest rate.
• Higher loan limits: While conforming loans do have limits, you can go even higher with jumbo conventional loans if you need to.
• Flexibility for some: Private mortgage lenders have more flexibility with conventional loans than they do with government-insured loans.
Downside of a Conventional Loan:
Along with some of the benefits of getting a conventional loan over a government-backed one, there are also some disadvantages to consider:
• Higher credit score requirements: You typically need credit scores of at least 620.
• Higher down payment requirements: Some conventional loan programs allow you to put down 3%, but expect to pay 5% typically. In contrast, FHA loans require a minimum down payment of 3.5%, and USDA and VA loans have no down payment requirement at all.
• Stricter qualifying guidelines: Your personal financial situation may be scrutinized more closely than a government-backed loan because the lender is taking on more risk by originating the loan.
Qualifying for a Conventional Loan:
If you’ve decided that a conventional loan is right for you, here are steps to qualifying for one:
• Check your credit score: Verify it is 620 or higher.
• Check your debt-to-income ratio: Lenders typically want to see that your total monthly debts are no more than 36% of your monthly gross income. Lenders may stretch their required DTI to 43% or higher in some cases, but the maximum Fannie Mae and Freddie Mac will allow for conforming loans is 50%.
• Research mortgage lenders: Take some time to look at different mortgage lenders, including what rates and fees they offer.
• Get preapproved. A mortgage preapproval is a letter from a mortgage lender effectively agreeing to lend you up to a certain amount of money to buy a home.
Next Steps in the Buying Process:
Once you have a preapproval letter in hand, start the house-hunting process. You can also apply with multiple lenders to compare rates and terms. When you are shopping for the best rates and submit mortgage applications to several lenders, do so within a short time period—typically 15 to 45 days. That way the credit scoring models will roll those applications into one credit inquiry on your credit report, which minimizes damage to your credit score.
The mortgage process can take a long time from start to finish, but taking each step carefully can help you get the best deal for your situation.
This information on Conventional Loans can be found at: https://www.experian.com/blogs/ask-experian/what-is-a-conventional-loan
FHA Loans:
FHA loans are mortgages that are insured by the U.S. government (the Federal Housing Administration, more specifically), but you obtain one by applying through an FHA-approved mortgage lender. FHA loans are considered slightly more risky to the lender since borrowing criteria is less strict, so the government backs the loan to reduce the lender’s risk, and you have to pay insurance for the life of the loan.
FHA VS. Conventional:
While FHA loans and conventional loans are both mortgages that allow you to borrow money to purchase a home, there are a few key differences:
• Down payment requirements: While you can get some conventional loans with as little as 3% down, most require 5% down, and borrowers often put down more than that. With an FHA loan, you can get a mortgage by putting down only 3.5%.
• Insurance requirements: A conventional mortgage only requires you to pay mortgage insurance if you put down less than 20%. And if you do put down less, the mortgage can be cancelled once you have 20% equity in the house. An FHA loan, on the other hand, requires you to pay mortgage insurance for the life of the loan (unless you put down 10%, and then you can stop paying it after 11 years).
• Borrowing criteria: Conventional loans have more stringent credit score requirements; FHA loans allow for borrowers to have lower credit scores.
• Interest rates: An FHA APR is usually 1.5 to 2 points higher than conventional fixed-rate mortgages for borrowers with good to excellent credit.
• Closing costs: With a conventional loan, you must pay for all closing costs in full at closing. An FHA loan lets you finance some closing costs and spread them out over time as part of your mortgage payment.
Types of FHA Loans
Not many homebuyers realize this, but there are several different types of FHA loans. In addition to traditional FHA loans, you also have these options:
• FHA 203(k) loans: These are rehabilitation loans that are intended to help you finance the repair and rehabilitation of a single-family home.
• Home Equity Conversion Mortgage (HECM): This FHA program is for seniors aged 62 and older, and it serves as a reverse mortgage. It allows qualified homeowners to withdraw some of the equity they’ve put into their home.
• FHA Energy Efficient Mortgage (EEM): This program allows homebuyers to finance energy-efficient improvements to a home as part of their FHA loan.
• FHA Section 245(a): The National Housing Act’s Section 245(a) is intended to help homeowners whose income is expected to increase, so the FHA created the Graduated Payment Mortgage in response. This mortgage’s payments increase gradually over a period of several years, and there are five different plan types available.
FHA Loan Requirements:
FHA loans have several important requirements that you should be aware of before you apply.
• Minimum down payment: You can make a down payment as low as 3.5%, though with worse credit scores, you may have to put 10% down.
• Debt-to-income ratio: All mortgage lenders look at your debt to income ratio (DTI), which compares how much you pay each month for debt with how much income you bring in each month. You typically can’t have a DTI ratio over 43% to qualify.
• Mortgage insurance: An FHA loan requires you to pay mortgage insurance, and the cost is spread across two payment types:
o One single bulk payment of 1.75% of the loan amount, which is due at closing but can be rolled into your loan financing.
o An additional .45% to 1.05% of loan total, which is charged annually for the life of the loan. This fee is spread out over your monthly payments.
• No recent foreclosures: If you’ve had your home foreclosed, you must wait three years until you’re able to qualify for an FHA loan.
• Other criteria: You also typically must have a Social Security number and proof of sufficient income or assets that indicate you can afford the mortgage.
Qualifying for an FHA Loan:
FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an
FHA loan depends on:
• The state of your credit score:
o If your credit score is between 500 and 579, you must put 10% down.
o If your credit score is 580 or above, you can put as little as 3.5% down.
• Make sure you have established credit history. It’s ideal to have at least two open accounts—preferably, one revolving account (such as a credit card or line of credit) and one installment account (such as an auto loan).
• Have a verifiable income. You’ll need to show a lender documents like paystubs, tax returns and possibly bank statements to prove that you have enough money to comfortably pay your mortgage.
• Calculate your DTI. To do this, tally up your total recurring monthly debt (such as credit card payments, mortgage, auto loan and so on) and divide it by your gross monthly income (the total amount you make each month before taxes, withholdings, and expenses).
• Save for a down payment. While you can nab a down payment as low as 3.5% with an FHA loan, it’s smart to save up to at least 6% so you have enough funds to cover your closing costs.
Next Steps in the Buying Process:
Once you have a preapproval letter in hand, start the house-hunting process. You can also apply with multiple lenders to compare rates and terms. When you are shopping for the best rates and submit mortgage applications to several lenders, do so within a short time period—typically 15 to 45 days. That way the credit scoring models will roll those applications into one credit inquiry on your credit report, which minimizes damage to your credit score.
The mortgage process can take a long time from start to finish, but taking each step carefully can help you get the best deal for your situation.
This information on FHA Loans can be found at:
https://www.experian.com/blogs/ask-experian/what-is-an-fha-loan/
VA Loans:
Who Is Eligible for a VA Loan?
VA loan eligibility extends to a broad range of current and former military service members, including combat veterans and troops who served in peacetime, active-duty personnel, and reservists. In some cases, spouses of service members—including those disabled, missing, or killed in action—are also eligible for VA loans.
Borrowing Requirements for VA Loans:
The VA has established three general requirements VA loan applicants must meet:
• You must have a stable source of income. The VA does not set a minimum income level required to get a VA loan, but the bank or credit union issuing the loan will probably want to see evidence of sufficient income to cover the monthly loan payments.
• You must have adequate credit. As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score.
• You must obtain a Certificate of Eligibility (COE) from the VA
Benefits of VA Loans
The benefits of VA loans boil down to saving you money and helping you become a homeowner sooner than you’d be able to with a standard mortgage loan:
• Lower interest rates. The annual percentage rate (APR) charged on a VA loan may be a percentage point or more lower the APR on a traditional mortgage loan.
• No or low down payment. Depending on the amount you want to borrow, it’s possible to get a VA loan without putting any money down on the sale.
• No private mortgage insurance (PMI) requirement.
• You can get multiple VA loans in succession. If you’ve paid off one VA loan and sold the property, you can apply for and receive additional VA loans, as long as you still meet necessary income and borrowing requirements.
• You can transfer VA loans. In lieu of selling property you’ve financed with a VA loan, you can transfer the remainder of your loan to another qualifying veteran, service member or spouse.
Next Steps in the Buying Process:
Once you have a preapproval letter in hand, start the house-hunting process. You can also apply with multiple lenders to compare rates and terms. When you are shopping for the best rates and submit mortgage applications to several lenders, do so within a short time period—typically 15 to 45 days. That way the credit scoring models will roll those applications into one credit inquiry on your credit report, which minimizes damage to your credit score.
The mortgage process can take a long time from start to finish, but taking each step carefully can help you get the best deal for your situation.
This information on VA Loans can be found at:
https://www.experian.com/blogs/ask-experian/how-to-qualify-for-a-va-loan/
USDA Loans
USDA loans are low-interest mortgage and home improvement loans that low-income suburban and rural homebuyers can get with no money down. Issued through the U.S. Department of Agriculture (USDA), these single-family home loans are designed to help buyers with lower-than-average incomes and less-than-ideal credit get into homes of their own.
Types of USDA Loans:
There are three types of USDA loans:
• Section 502 Direct Loans – This type of USDA mortgage loan is available to low- and very-low-income borrowers. Loan proceeds may be used to purchase, renovate or relocate a home, or to make site improvements including installation of water and sewage services.
• Single Family Housing Repair Loans & Grants – Also known as the Section 504 Home Repair Program, this USDA initiative lends funds to homeowners who wish to repair or upgrade their homes. The program is available to applicants with incomes that fall below 50% of the local median income who cannot get affordable credit elsewhere, to fund improvements on homes they occupy. Single Family Housing Repair Loans offer financing of up to $20,000 at a fixed interest rate of 1%, to be repaid over a period of up to 20 years.
• USDA Guaranteed Loans – A contrast to the direct loans issued by the USDA itself, USDA Guaranteed Loans are issued through USDA-approved lenders, including banks and credit unions. The Guaranteed Loan program promises lenders it will cover 90% of any loan issued under its guidelines if the borrower fails to repay the loan. That enables lenders to offer low-interest loans to borrowers who don’t have a down payment and have a less-than-ideal credit score. With this type of loan, the buyer will be required to pay a type of mortgage insurance fee called a guarantee fee if they don’t put any money down.
How to Qualify for a USDA Loan
You are eligible to apply for a USDA loan if you meet the following requirements:
• You are a U.S. citizen or permanent resident.
• The property you wish to buy or renovate is located in an eligible rural or suburban area; its market value falls below designated limits for the area; and it will serve as your primary residence.
• You can show stable, dependable income sufficient to make the loan payments.
• Your income is sufficiently below local median income for your area and meets specific requirements dependent on the loan type and local median income.
• For USDA direct loans, the property you’re intending to buy must be under 2,000 square feet in area.
• You don’t own another home.
What Credit Score is Needed for USDA Loans:
The USDA doesn’t have a fixed credit score requirement, but most lenders offering USDA-guaranteed mortgages require a score of at least 640, and 640 is the minimum credit score you’ll need to qualify for automatic approval through the USDA’s automated loan underwriting system.
Next Steps in the Buying Process:
Once you have a preapproval letter in hand, start the house-hunting process. You can also apply with multiple lenders to compare rates and terms. When you are shopping for the best rates and submit mortgage applications to several lenders, do so within a short time period—typically 15 to 45 days. That way the credit scoring models will roll those applications into one credit inquiry on your credit report, which minimizes damage to your credit score.
The mortgage process can take a long time from start to finish, but taking each step carefully can help you get the best deal for your situation.
This information on USDA Loans can be found at:
https://www.experian.com/blogs/ask-experian/what-is-a-usda-loan/
Idaho Housing Loans:
Directly from the website listed below, Idaho housing is just one option for buyers that provides low mortgage rates, down payment assistance and closing cost assistance.
Whether you’re buying a house or refinancing, Idaho Housing offers home loan options including: conventional loans, Rural Housing development, FHA and VA loans.
They also offer a homebuyer tax credit where you can get up to $2,000 or 35% of the total mortgage interest paid in income tax credits each year for the life of the loan as well as homebuyer education and support through the life of your loan.
To be eligible for the Idaho Housing Loans, a homebuyer can make up to $150,000 per year. Property Types include: single family, townhouse, condos and manufactured housing.
Next Steps in the Buying Process
Once you have a preapproval letter in hand, start the house-hunting process. You can also apply with multiple lenders to compare rates and terms. When you are shopping for the best rates and submit mortgage applications to several lenders, do so within a short time period—typically 15 to 45 days. That way the credit scoring models will roll those applications into one credit inquiry on your credit report, which minimizes damage to your credit score.
The mortgage process can take a long time from start to finish, but taking each step carefully can help you get the best deal for your situation.
For more information visit: https://www.idahohousing.com/homebuyers/home-loans