Last week, I discussed the general types of mortgages that are available when purchasing a house; however, in order to fully understand what’s out there, it’s important to look at some of the more specific options.
1.) FHA HOME LOAN: This loan is only for your primary residence and requires 3.5% down (which can actually be a gift from a family member). It has upfront and monthly mortgage insurance, and requires the borrower to have a minimum FICO credit score of 620 and a maximum debt to income ratio of 43% (with an AUS approval).
2.) HOMEPATH FINANCING: This option can be used for multiple homes, with 5% down for your primary residence, 10% down for your second home, and 10% down for investment properties (1 unit). With this product, there is no appraisal required, but it has a maximum debt ratio of 43% with an AUS approval.
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3.) FHA FLIPPED PROPERTIES—SELLER HAS OWNED HOME <90 DAYS: This option requires two appraisals—only one of which is to be paid by the buyer. It can have a purchase price which is over 20% of the acquisition cost when the value is supported, but the home inspection needs to be covered by the buyer.
4.) HUD REO: This is another loan which can only be used for a primary residence and also requires 3.5% down at closing. If the buyer has already had an HUD provided appraisal, it can be used as long as it has yet to expire. Minor escrow holdbacks are allowed as long as they meet minimum property standards, and pools do not need to be filled (they must still be covered).
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5.) JUMBO LOANS: When used for a primary residence, this loan requires a 720 minimum FICO score with 20% down (up to $4 million). For a second home, it requires 25% down; however, reduced LTVs may apply depending upon the market area. In short, there are many of these types of programs available with the average requiring 10% down up to $750,000 with LPMI.
6.) CONVENTIONAL FLIPPED PROPERTIES—SELLER HAS OWNED HOME <90 DAYS: For this option, any increase in value must be supported by the appraiser, with supporting documentation which may include an AVM, documented receipts for improvements, or a second appraisal.
7.) USDA RURAL HOUSING: This is also for buyers seeking a loan for their primary residence with 100% financing. The maximum debt ratio cannot exceed 43% and there are household income limit requirements.
8.) CONVENTIONAL LOANS: For primary residences, a minimum of 5% down is required. For second homes, buyers will need to have 10% down, along with 15% for any additional investment properties.
9.) VA HOME LOANS: This option is only for primary residences and is available to veterans who served in the U.S. military (regular active and Reserve/National Guard). 100% financing is offered with no money down and flipped properties which have been owned for more than 90 days are also allowed.
If you are interested in learning more, please feel free to contact me at 404-445-1033.
