The sheer number of financing options available to home buyers today can be more than a tad bit overwhelming. It often takes a good amount of research and often times even more stress for buyers to decide which loan option is best for them. Understanding the various loan options is the first step toward making the right decision. So here are 5 financing options to help you buy a house in Roseburg.
1. Conventional Loan
The first of the Roseburg financing options to consider is the conventional loan. This is the old standby option that most buyers used in the past.
Unlike many other mortgages, these loans are mortgages that are not insured or guaranteed by the federal government. They usually have fixed interest rates for the whole loan term (fixed-rate mortgage). Conventional loans have stricter requirements including larger down payment, higher credit score, and lower debt-to-income ratios. These requirements make them the most difficult to qualify for, but conventional mortgages are usually less costly than federally guaranteed mortgages.
Conventional loans also typically take one of two forms: conforming or non-conforming.
- Conforming loans: As the name suggests, these loans “conform” to guidelines set forth by entities like Fannie Mae and Freddie Mac, guidelines having to do with things like loan amount limit.
- Non-conforming loans: On the flip-side, non-conforming don’t always necessarily comply with these guidelines and often come with higher interest rates.
If these differences sound crazy and a little confusing, that’s becasue they are. It pays to consult an experienced real estate for an explanation, guidance and one or two recommendations for a good lender. (To discover more, give me a call at 541-643-1131)
2. FHA Loan
A Federal Housing Administration (FHA) loan is one of the government-backed loans, unlike a conventional loan. Becasuse of this backing, FHA loans almost always have lower down payment requirements and are easier to qualify for. This means that an FHA loan is an excellent and popular choice for Roseburg home buyers, especially first timers and those with credit troubles, foreclosures, or bankruptcy in the past. FHA provides a great way for these would-be home buyers to get into home ownership with a lower credit score and a down payment of as little as 3.5%.
But… there is a catch. With the lower down payment, buyers will usually, if not always have to pay for private mortgage insurance (PMI). The cost of PMI (a risk reduction safety net for lenders who loan with lower down payment) is typically rolled into the monthly mortgage payments. What this means is that FHA loans can cost substantially more over the life of the loan. There is a % formula to estimate what your PMI would be. Questions, just ask.
3. VA Loan
VA loans are awesome! If you are a veteran or active-duty military, first of all, “thank you!”
The VA guaranteed loan is a very attractive financing option to help veterans buy a house in Roseburg, with very little or no down payment! This loans are guaranteed by the U.S. Department of Veterans Affairs.
It is important to note that the VA does not make loans itself, so it wouldn’t do you any good to drive to the VA to apply… not going to happen. The VA guarantees mortgages made by qualified lenders. This means you can go to pretty much any local or online lender to apply. These guarantees allow veterans and service people to obtain home loans with favorable terms, usually without a down payment. In most cases, VA loans are easier to qualify for than conventional loans. Lenders generally limit the maximum VA loan to conventional mortgage loan limits.”
4. Owner Financing
One of the growing Roseburg financing options is owner financing. This option is specifically popular in recession times and slower or buyers markets. In this financing arrangement, “the current homeowner puts up part or all of the money required to buy a property. In other words, instead of taking out a mortgage with a brick and mortar lender, the buyer is borrowing the money from the seller. Buyers can completely finance a purchase in this way, or combine a loan from the seller with one from the bank.” The seller and buyer agree on the interest rate and the amount of the monthly payment, and then (typically) a promissory note is drawn up and entered into the public record.
Owner financing can take to the form or a mortgage or lease-purchase agreement (sometimes known as a contract for deed). Just be aware that owner financing often carries more risk for you, the buyer. So be sure you call me before you get too involved in an owner carry. Differnet laws may apply and are state specific.
5. Type of Mortgage Rate
Besides the kind of loan when considering financing options for a Roseburg house, you will also need to consider the type of mortgage rate that best fits your needs. The two main types are fixed-rate and floating- or adjustable-rate and each has its own peculiar benefits and downsides.
- With a fixed-rate mortgage, the interest rate stays the same over the entire life of the loan – it never changes. The advantage here is that buyers will know what their payments are always going to be and can budget accordingly. But if you get locked into a fixed rate when rates are high, it may not be such a great thing.
- An adjustable-rate mortgage (ARM) starts out with a fairly low-interest rate that increases later on. This type of mortgage rate “is designed to assist first-time buyers or people who expect their incomes to rise . . . Of course, this option can be risky if your income does not grow in step with the increase in interest rate.”
Cut Through the Confusion in Financing Options
Often, in light of all these possibilities cluttered with industry jargon, it takes a real estate professional to make sense of it. And that exactly where the Sky Team agents can help. Whether you’re looking to work with an agent or just have questions, we’re here to help. If you found these financing options helpful when buying a house in Roseburg, please feel free to share.