Whether you’re purchasing a new home or looking to refinance, shopping for the best rate will save you money. Read below to discover which option might be best for you.
First-Time Home Buyer
Many first-time home buyers opt for an FHA mortgage due to its low down payment requirement. An FHA loan is a type of government-backed mortgage insured by the Federal Housing Administration, a branch of the U.S. Department of Housing and Urban Development, or HUD. FHA borrowers pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
- Low down payments — as little as 3.5%
- Down payment may be gifts from family
- Down payments may be funds from Down Payment Assistance programs
- Down payments may be from grants
- Low closing costs
- May have seller pay closing costs (up to 6%)
- Available to any borrower
- Easy credit qualifying — credit scores as low as 500
- Available to borrowers 2 years out of bankruptcy or 3 years out of foreclosure
- Better interest rates for lower credit scores — no penalties for borrowers with lower credit
Current Home Owner
Many homeowners can benefit from refinancing their homes in one of two primary ways — getting cash from the equity in their homes or getting a lower interest rate and lower monthly payments.
Cash-Out Refinance: The average homeowner gained about $65k in equity in their home in 2018. This is a resource that can be tapped into by the homeowner for things like remodeling their home or sending a child to college.
Standard Refinance: Many homeowners have a higher interest rate than necessary and/or they are paying Private Mortgage Insurance (PMI). By refinancing, these homeowners can benefit from lower monthly mortgage payments, and those with PMI can benefit from no longer making that additional payment each month.
Enhanced Relief Program: Freddie Mac’s Enhanced Relief Refinance program provides refinance opportunities to borrowers with existing Freddie Mac mortgages who are making their mortgage payments on time but whose loan-to-value (LTV) ratio for a new mortgage exceeds the maximum allowed for standard refinance products. Here are some key benefits:
- Reduced monthly principal and interest payments
- Lower interest rate
- Shorter amortization term
VA Mortgage Benefits
There are amazing housing benefits available to Veterans, but more than 80% of those eligible don’t take advantage of these benefits.
New VA Home Purchase Benefits:
- No down payment as long as the sales price does not exceed the appraised value
- No private mortgage insurance (PMI) required
- VA rules limit the amount that can be charged for closing costs
- Closing costs may be paid by the seller
- The lender can’t charge a penalty fee if the loan is paid off early
- The VA may able able to provide some assistance if the borrower runs into difficulty making payments
- Borrower does not need to be a first-time homebuyer
- Can be used more than once
VA Refinance Benefits:
- No appraisal or credit underwriting package required (IRRRL)
- Can be done with no money out of pocket (IRRRL)
- Ability to get cash from the equity in the home (VA Cash Out Refinance)
- VA will guaranty loans up to 100% of the value of the home
- Can turn a non-VA loan into a VA-loan (VA Cash Out Refinance)