Loans: Knowing Your Loan Options
By Nicole Rueth - September 9, 2020
In today’s financial market, there are dozens of real estate finance options to choose from, and those options typically vary depending on the type of property you’re buying, the amount you need to borrow, your credit profile, and the condition of the property. When evaluating your financing options, it is important to work with a lender who has experience in the various loan types guiding you on how to best leverage your personal equity while maximizing your unique goals and circumstances.
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It always pays to know your loan options. At the Rueth Team, we are committed to finding the best possible solution for each of our clients’ unique needs. Read on to learn more about the loan options that the Rueth Team can provide for you:
Conventional Loan – Less Restriction, Same Results
Conventional loans provide a variety of options for individuals in the real estate market, with as little as 3% down and a 620 credit score. A conventional loan is defined by a county’s loan limit and provides its borrowers options for no mortgage insurance, flexibility for time on the job or use of future income, and the combination of loans to avoid mortgage insurance. For clients with strong credit profiles, conventional loans often provide the most cost-effective solution.
FHA Loan – Minimize Up-Front Expenses
Federal Housing Administration (FHA) Loans can help reduce the amount of money needed for closing, a down payment, or if a buyer lacks the necessary credit to qualify for other loans. These variations can make securing the funding for a home purchase easier for those who qualify. FHA loans are so flexible that you can have a credit score as low as 600, a recent bankruptcy, foreclosure or short-sale, and a less favorable debt-to-income ratio than is required for a conventional loan. The cost of securing an FHA loan is the upfront mortgage insurance in addition to the monthly mortgage insurance. Unlike conventional loans, FHA MI does not fall off once the loan drops below 80% loan to value.
VA Loan – Active Military and Veterans
The VA Loan is specific to those who have or are actively serving in the armed forces. Only the individual themselves, or a qualifying family member, are eligible to receive this type of loan with 100-percent financing available and no monthly mortgage insurance. VA Loans are an incredible option for those who have served our country, as they allow for the lowest credit score, the highest debt-to-income ratio, and the shortest time since any personal credit issues. They typically also have the lowest interest rates, affording our Veterans the lowest possible monthly payment.
Jumbo Loan – Purchasing in a High-Priced Neighborhood
Jumbo loans allow buyers to purchase a high-priced residence. Jumbo loans typically start $1 above the area conforming loan limit. For example, in the Denver market, the 2020 conventional loan limit is $510,400. The “High Balance” conventional loan limit is $575,000 (based on higher median income by county). This means Jumbo loans can start at $510,401 or $575,001, depending on the cost-benefit to the buyer. Often, Jumbo loans require more documentation and stronger credit profile borrowers since they are larger loan amounts.
USDA Loan – For Living Outside the City
If purchasing in a designated rural area, USDA loans offer buyers the ability to purchase with no down-payment. You will want to check the USDA map or talk to your loan officer as USDA defined areas are typically outside of major populated areas. USDA Loans require less down payment, lower interest rates, and smaller mortgage insurance fees than FHA, giving buyers a low monthly mortgage payment.
HECM Reverse Mortgage – Reap the Reward of a Long-Term Investment
Home Equity Conversion Mortgages are specifically designed for individuals ages 62-years or older who have established equity in their home. By optimizing this equity and working in partnership with your Financial Advisor and family, an individual can purchase a home and never have a mortgage payment again, or take advantage of building wealth via alternate opportunities.
Physician and Dentist Loan – For Medical Professionals
A loan type specific to those in the medical, dental, or chiropractic fields can receive special funding targeting their specific needs. Recognizing a professional’s path from Medical Student to Resident to Practice, this loan program offers solutions at every stage. Benefits include 3-to-5 percent down, no mortgage insurance, no prepayment penalty, the use of future income and forgiveness of student loan debt.
Renovation Loan – Buy a Fixer-Upper
If you’ve found a home that needs a lot of TLC, a renovation loan might be the perfect option. A renovation loan is similar to a construction loan and a purchase rolled into one. These loans give the buyer the option of rolling in renovation costs based on a “to be” value. Renovation loans are available for primary loans, second homes, and investment properties, so you can buy a property at a lower price point, knowing improvements will be made through the money borrowed.
If you’re ready to purchase your first or next home, the Rueth Team is here for you! Contact us today for all of your mortgage and real estate financing needs.