LOAN OPTIONS

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I know I want to buy a house, but what loan option is right for me?

Did you know that you have choices when it comes to home loans?  There are different options, each with unique benefits.  What's most important is understanding your financial goals, time horizon and credit profile, so that we can match you with the best option. 

 

FHA vs. Conventional Loans

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The decision of FHA vs. Conventional Financing is typically black and white.
FHA Pros & Cons
  • Interest rates are typically lower than conventional
  • Rates and qualifying guidelines are often more favorable for lower credit scores
  • Only requires 3.5% down payment
  • FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount (this can be financed/added to the loan amount)
  • FHA  charges an annual mortgage insurance rate that is based on how much you put down rather than your credit score (collected monthly with your payment)
  • The mortgage insurance does not cease if you put down less than 10% based on current guidelines.  It will only stop when you terminate the mortgage.
Conventional Pros & Cons
  • Interest rates are typically higher than FHA rates 
  • Requires 5% down payment, unless you qualify for a program that permits as little as 3% (1st time buyer or income limited programs)
  • There is no upfront mortgage insurance premium 
  • Mortgage insurance is only required if putting down less than 20%
  • Mortgage insurance rates are largely based on down payment, credit score and loan duration
  • Options exist to pay mortgage insurance in a lump sum at closing, monthly or a combination of the two
  • The mortgage insurance will cease automatically at 78% Loan to Value (when you have paid down 22%), but you can request review for removal at 80% LTV (check with your loan servicer)
 

Section 184 - Native American  Home Loans

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The Section 184 Indian Home Loan Guarantee Program is a home mortgage product specifically designed for American Indian families.  With Section 184 financing, borrowers can achieve homeownership with a low downpayment and flexible underwriting. 

What Should You Know About a Section 184 Loan?
  • Eligible borrowers must be American Indians or Alaska Natives who are members of a federally recognized tribe (We will request a copy of your CDIB Card)

  • Your home must be in an eligible area - All of Oklahoma is eligible

  • 184 loans are only available for primary residence purchases or refinances of single family homes because the program's goal is to expand homeownership among Native Americans

Key Benefits
  • Low Down Payment: 2.25% required on loans over $50,000 (You may use down payment assistance or gift funds for this)

  • Low Interest Rates: Rates are market driven rather than credit score driven (typically they are near FHA rates)

  • Low Upfront Loan Guarantee Fee: A one-time 1.5% fee is paid at closing; it can be financed (added to the loan amount)

  • Low Mortgage Insurance Rate: .25% for loans with loan to value greater than 78% (on a 100k loan, that's $20.83/month)

  • Manual Underwriting:  A person evaluates your loan file rather than an automated underwriting system, allowing for a more holistic view

 

Veterans Affairs Loan

The Section 184 Indian Home Loan Guarantee Program is a home mortgage product specifically designed for American Indian families.  With Section 184 financing, borrowers can achieve homeownership with a low downpayment and flexible underwriting. 

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The US Department of Veterans Affairs provides a loan guarantee program to help service members, Veterans and eligible surviving spouses become homeowners.  With VA financing, borrowers can achieve homeownership with no downpayment and no ongoing mortgage insurance expense.  

What Should You Know About a VA Loan?
  • Borrowers seeking a Veteran Affairs (VA) Home Loan must have a Certificate of Eligibility (COE) which evidences available entitlement

  • Your lender can request the COE on your behalf, but if it cannot be issued automatically via the VA portal, an application for the COE must be completed. You will need your most recent DD-214 member copy 4.

  • In some cases, a statement of service letter must be submitted to obtain the COE (typically for National Guard or Reserves) This letter must include the following: 

    • The Veteran's Full Name​

    • Social Security Number (last 4 digits is acceptable)

    • The date of entry into active duty (BASD, PEBD, or BEPD)

    • The duration of lost time, if any

    • The name of the command providing the information (maybe included in the letterhead)

    • The type of orders the Veteran is serving under (typically Title 10 USC or Title 32)

    • Whether the Veteran is serving in a training status, and / or called to active duty

    • No COS is required i.e. Honorable, Under Honorable Conditions, Other Than Honorable

  • The home you seek to purchase must be your primary residence

  • Unique to the VA loan, borrowers must qualify with maintenance and utilities for the property as well as monthly childcare expense factored into their debt to income ratio

Key Benefits
  • No Down Payment: As long as the borrower has the available entitlement for the loan amount sought, no down payment is required

  • Low Interest Rates: Rates for VA loans are market driven, typically near FHA rates

  • Upfront Loan Funding Fee: A one-time fee is paid at closing; it can be financed (added to the loan amount). The rate is dictated by your entitlement code (listed on the COE) as well as whether it is first time or subsequent use.  Some veterans are exempt from the funding fee for service connected disability.

  • No Mortgage Insurance: VA Loans are not subject to annual or monthly mortgage insurance

 

Rural Development Loan

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The USDA Rural Development home loan guarantee program is a home mortgage product specifically designed for use by low to moderate income families living in eligible rural areas.  With RD financing, borrowers can achieve homeownership with no downpayment and low monthly mortgage insurance

What Should You Know About a Rural Development Loan?
  • Eligible borrowers must meet income eligibility limits set by USDA

  • Your home must be in an eligible area, also as defined by USDA

  • RD purchase loans with a Single Family Housing Guaranteed Loan are only available for primary residence purchases of single family residences (refinances are also available)

  • One must be a US Citizen, non-citizen national or Qualified Alien to use this program

  • Only 30 year fixed rate loans are available

Key Benefits
  • No Down Payment: This product offers 100% financing

  • Low Interest Rates: Rates are market driven and typically near FHA rates

  • Low Upfront Loan Guarantee Fee: A one-time 1% fee is paid at closing; it can be financed (added to the loan amount)

  • Low Annual Loan Guarantee Fee (like Mortgage Insurance Rate): .35% for the life of the loan