The first thing you need to know is that there isn’t a ‘better’ or a ‘worse’ version of a mortgage. They are all safe, well-regulated, 50-state legal mortgages and are suitable for anyone financing a home. Things like prepayment penalties, balloon payments, and other toxic features are, thankfully, gone. Even adjustable rate mortgages – once the golden child of the sub-prime market – are largely sidelined due to low fixed rates.
So, the decision about which kind of mortgage you take out comes down to one simple guiding principle:
Which mortgage that I am qualified for gives me the lowest payment?
Surprisingly, a lot of thought goes into this simple question. I need to think about your credit scores, your credit history, how you earn your income, your debt-to-income ratios, what you have for assets, whether there are gift funds involved, whether we are planning on asking the seller for any help with the closing costs and, if so, how much. Each of these elements have the potential to rule-out certain loan programs or point us towards others.
Once I have those items sorted out, there are some further conversations about where we are planning to buy and what type of property. How much money do we want to have left over? How long do we anticipate living in the home we’re buying? The answers to these questions will help me make a final recommendation as to how to structure your mortgage and which mortgage program is best suited for you.
When you hear people talking about mortgage programs – and you will now that you are thinking about them – some of those people will be offering their ‘advice’ on the best kind of mortgage or commenting that you shouldn’t take out this or that kind of mortgage. Be confident in the knowledge that the one I recommend is the right one for you for all the right reasons.
These are the types of mortgages that I work with:
- Conventional Mortgages: These are mortgages that are underwritten and insured by Fannie Mae and Freddie Mac. They provide the “plain vanilla” mortgage solution to well-qualified borrowers with at least 5% to put down, higher credit scores, and lower debt-to-income ratios
- FHA Mortgages: These mortgages offer more flexible solutions to borrowers who have a little less for down-payment, lower credit scores, higher debt-to-income ratios, or a recent bankruptcy, foreclosure, or short-sale.
- USDA Mortgages: This unique program provides 100% financing to low-to-moderate income borrowers in “rural” areas.
- VA Mortgages: The Veterans Administration provides 100% financing to those who’ve served in our armed forces.
- Renovation/Rehab Mortgages: These are mortgages that provide funds to repair and renovate properties. They come in a variety of flavors (see below) and you can learn more about these in the Renovation link here:
- FHA 203k Limited Mortgages for projects involving less than $35,000 in repairs
- FHA 203k Traditional Mortgages for larger projects
- Fannie Mae HomeStyle Streamline Mortgages for projects involving less than $15,000 in repairs
- Fannie Mae HomeStyle Traditional Mortgages for larger projects
- Reverse Mortgages: These are a special type of FHA mortgage for homebuyers at least 62-years of age. You can learn more about these in the Reverse Mortgage link here: