Radiant New Horizon Homes.com

house BUYERS - FINANCING

This page is to educate you, the buyer, in the basics of different types of mortgage loans (both conventional and private).

Conventional

TYPES

FHA

  • Maximum Loan: $ 417,000

  • Down Payment: 3 1/2 % - single family residences (multi-family and condos may require more, about 5 %; inquire with lender for details).

  • Minimum Credit Score: 580 (or 500 with 10 % down.

  • Minimum Employment Time: 2 years

    Note: also includes FHA 203K purchase and rehab loans.

  • CHFA

  • Maximum Loan: $ 175,000

  • Down Payment: 3 % - single family residences (for multi-families, condos, etc., inquire with lender for details).

  • Minimum Credit Score: 600

  • Minimum Employment Time: 1 year

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    VA

  • Maximum Loan: inquire with lender

  • Down Payment: none (earnest money deposit only)

  • Minimum Credit Score: 500

  • Minimum Employment Time: inquire with lender for details

    Note: Must be a veteran to qualify.

  • CONVENTIONAL

  • Maximum Loan: up to $679,650

  • Down Payment: 5-30 % (possibly as low as 3 % or higher than 30 %)

  • Minimum Credit Score: 500 (possibly lower)

  • Minimum Employment Time: 2 years

    Note: This is an "old-fashioned" conventional loan. Generally designated as '90/10', '80/20', etc. This means lender puts up 90 % of purchase funds and buyer/borrower puts down the remaining 10 %. An '80/20' would be similar with lender paying 80 % and buyer paying 20 %.

  • USDA

  • Maximum Loan: $729,500

  • Down Payment: none (earnest money deposit only)

  • Minimum Credit Score: 500

  • Minimum Employment Time: 2 years

    Note: Property must be in a rural area. Funds can be used to build, renovate or relocate a home.

  • JUMBO

  • Maximum Loan: $2,500,000

  • Down Payment: 15 % (or more)

  • Minimum Credit Score: 680

  • Minimum Employment Time: inquire with lender for details

    Note: This is a conventional loan for loans above and beyond conventional loan maximum loan limits.

     

  • APPRAISALS

    Appraisal standards for low down payment mortgages are stricter than for 'old fashioned' conventional loans. As such, often properties that "need work" ('as-is', 'investment' or other similar verbage) will require a purchase and rehab loan such as an FHA 203K. This is a more affordable way to purchase an Owner-Occupied 'investment property' as a lower down payment is required. Proposed work must be estimated and completed by licensed contractor(s). Farming out to subcontractors not permitted on a 203K.

    For information on our recommended lenders and the products and services they offer, click on the image below...

     

    And now for private lenders...

    Private Lenders

    Private lenders are individual(s) or entities in the business of lending capital for investments secured through various means such as real estate. Examples of private lenders are personal investors (individuals or groups of individuals (for example, friends and family) with access to capital directly or by pooling resources together who fund loans) and companies that manage their own capital and issue loans similar to conventional bank loans.

    Seller financing (also called owner financing) is another example of private lending. A typical seller financed arrangement (also known as a 'contract for deed', 'land contract' or 'installment option') is a 30 year term mortgage with a balloon payment due after a much shorter time period, typically 2-10 years. Often, this can help buyers who do not qualify for conventional financing to obtain a conventional loan through a re-finance (on or before balloon payment due date) which is often easier to obtain than initial financing.

    Another example of a seller financed arrangement is down payment assistance. An example of this is where a buyer qualifies for an 80/20 or 90/10 mortgage but doesn't have the required 10-20 % down payment. In this case, the seller "loans" the down payment to the buyer thereby allowing the bank to count the down payment as paid and disburse the remaining 80-90 % needed to close the deal. The buyer would then pay back 2 loans: the main one to the bank and the financed down payment to the seller.

    It is important to note that the interest rates are generally higher than that for conventional loans (many private loans range from 4-10 %) but it is also important to note that in some cases, a private loan may be the only solution. The end justifies the means !

    However, finding a private lender may be difficult, perhaps more difficult than you may think and finding the right private lender can be like finding a needle in a haystack. This is because private lenders often serve specialty niche markets, are smaller companies (or just private individual(s)) and work mainly on referrals and word of mouth.

    As we have done with conventional lenders ("Dr. I's Golden Needle in a Haystack Lending Team"), our aim is also to help you find that right private lender ! Although it may take a bit of effort to find that right private lender, it is usually worth it. You'll be glad you did !

    For resources to help you find that perfectly right private lender, click on the image below...

    Coming up next, Inspections. Any questions ? You know what to do...

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