WE HAVE PARTNERED WITH PRIVATE LENDERS THAT OFFER A VARIETY OF MORTGAGE AND INVESTMENT LOAN PROGRAMS FIT FOR YOU!
NOT SURE WHAT LOAN PROGRAM YOU MAY QUALIFY FOR?
1. Conventional Mortgages
A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming loans.
A conforming loan simply means the loan amount falls within maximum limits set by the Federal Housing Finance Agency. The types of mortgage loans that don’t meet these guidelines are considered non-conforming loans. Jumbo loans, which represent large mortgages above the FHFA limits for different counties, are the most common type of non-conforming loan.
Generally, lenders require you to pay private mortgage insurance on many conventional loans when you put down less than 20 percent of the home’s purchase price.
Pros of conventional mortgages
• Can be used for a primary home, second home or investment property
• Overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher
• You can ask your lender to cancel PMI once you’ve reached 20 percent equity
• You can pay as little as 3 percent down on loans backed by Fannie Mae or Freddie Mac
Cons of conventional mortgages
• Minimum FICO score of 620 or higher is often required
• You must have a debt-to-income ratio of 45 percent to 50 percent
• You’ll likely need to pay PMI if your down payment is less than 20 percent of the sales price
• Significant documentation required to verify income, assets, down payment and employment
Who should get one?
Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.
2. Government-Insured Mortgages
The U.S. government isn’t a mortgage lender, but it does play a role in helping more Americans become homeowners. Three government agencies back mortgages: the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans) and the U.S. Department of Veterans Affairs (VA loans).
• FHA Loans – Backed by the FHA, these types of home loans help make homeownership possible for borrowers who don’t have a large down payment saved up or don’t have pristine credit. Borrowers need a minimum FICO score of 580 to get the FHA maximum of 96.5 percent financing with a 3.5 percent down payment; however, a score of 500 is accepted if you put at least 10 percent down. FHA loans require two mortgage insurance premiums: one is paid upfront, and the other is paid annually for the life of the loan if you put less than 10 percent down, which can increase the overall cost of your mortgage.
• USDA Loans – USDA loans help moderate- to low-income borrowers buy homes in rural areas. You must purchase a home in a USDA-eligible area and meet certain income limits to qualify. Some USDA loans do not require a down payment for eligible borrowers with low incomes.
• VA Loans – VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. VA loans do not require a down payment or PMI, and closing costs are generally capped and may be paid by the seller. A funding fee is charged on VA loans as a percentage of the loan amount to help offset the program’s cost to taxpayers. This fee, as well as other closing costs, can be rolled into most VA loans or paid upfront at closing.
Pros of Government-Insured Loans
• They help you finance a home when you don’t qualify for a conventional loan
• Credit requirements are more relaxed
• You don’t need a large down payment
• They’re open to repeat and first-time buyers
Cons of Government-Insured Loans
• Many of these loans have mandatory mortgage insurance premiums that cannot be canceled on some loans
• You could have higher overall borrowing costs
• Expect to provide more documentation, depending on the loan type, to prove eligibility
Who should get one?
Government-insured loans are ideal if you have low cash savings or less-than-stellar credit and can’t qualify for a conventional loan. VA loans tend to offer the best terms and most flexibility compared to other loan types for qualified borrowers.
3. Other Loan Types
• Construction Loans: If you want to build a home, a construction loan can be a good choice. You can decide whether to get a separate construction loan for the project and then a separate mortgage to pay it off, or wrap the two together. In general, you need a higher down payment for a construction loan and proof that you can afford it.
• Interest-Only Mortgages: With an interest-only mortgage, the borrower pays only the interest on the loan for a set period of time. After that time period is over, usually between five and seven years, your monthly payment increases as you begin paying your principal. With this type of loan, you won’t build equity as quickly, since you’re initially only paying interest. These loans are best for those who know they can sell or refinance, or for those who can reasonably expect to afford the higher monthly payment later.
• Balloon Mortgages: Another type of home loan you may come across is a balloon mortgage, which requires a large payment at the end of the loan term. Generally, you’ll make payments based on a 30-year term, but only for a short time, such as seven years. At the end of that time, you’ll make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared.
4. Bank Statement Program
Bank statement mortgages for self-employed, contract, or freelance workers
No tax returns? No problem
Mortgage companies need to verify your income before they’ll approve you for a home loan. They usually do this by looking at W2 tax forms.
That can be a problem if you work for yourself.
Business owners, freelancers, contractors, and seasonal or gig workers likely won’t have the tax forms needed for a traditional mortgage.
But if you have non-traditional income, you might be able to get a “bank statement mortgage.”
That means you simply prove your income by showing one or two years of regular bank deposits.
How lenders determine your income:
When going through the process of buying or refinancing a home, there are specific steps to undergo.
One such step requires documenting your income. That including savings, retirement, investment balances, and debts.
This can be challenging for self-employed mortgage applicants. These folks often have hard-to-document income and/or business expenses.
For instance, a self-employed worker might say they earn $7,000 a month. But after business write-offs, their taxable income might only be $5,000 a month.
This could reduce their home buying budget by more than $150,000.
Documented monthly income
Qualified monthly mortgage payment
Qualified home buying budget
**Loan assumptions: Example assumes a 30-year, fixed-rate mortgage with 3.75% interest and 10% down on a home located in Ohio. Your own rate and monthly payments may be different
How to get a mortgage when you’re self-employed or freelance
So, you’re self-employed. You have a strong credit score and a solid financial track record. But you’re having trouble qualifying for a mortgage because you don’t have traditional W2s.
Fortunately, a bank statement loan program may be an ideal solution!
5. Refinance Option
Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance:
• To obtain a lower interest rate
• To shorten the term of their mortgage
• To convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa
• To tap into home equity to raise funds to deal with a financial emergency, finance a large purchase, or consolidate debt
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