Alternative Loan Types That New Home Buyers Can Consider

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First-Time Seller Tips: What You Should Know In Advance

When I put my house on the market, nobody told me about the flurry of real estate agent meetings, showings, open houses, and staging appointments. When you add the paperwork, I was overwhelmed. After the process was over and I left the closing, I decided to create a website that focused on all of those things that I didn't know I'd have to do. My goal for this site is to make sure that other first-time sellers have a resource to learn what they can expect from the sale and closing process. I hope that the posts here help you prepare for your first sale with the confidence of an old pro.


Alternative Loan Types That New Home Buyers Can Consider

15 December 2017
 Categories: , Blog

If you are looking for a new home, you might feel discouraged if you can't qualify for a conventional mortgage. These often require a large down payment which many people cannot afford, especially in areas where even "starter" real estate is priced high. Conventional mortgages often require a good credit history and extensive proof of employment, which can be hard for some people to verify.

If you are having a hard time getting pre-approved for conventional lending, you might decide to look at other mortgage options to help you buy a home. Here are some programs and alternative loan types to consider. 

FHA Loans

FHA loans are backed by the government to make it possible for people with less than perfect credit and smaller down payments to become homeowners. In order to qualify, you usually need a credit score of 580 with a downpayment of 3.5% of the purchase price. Some lenders will allow a lower score if you have a large enough down payment to offset the poorer number. 

There are a number of benefits. An FHA loan can be assumable, making the property easier to sell at the next buyer. They also don't have income requirements, so they are accessible to people from all walks of life. FHA loans do take longer to process, so some sellers may choose a buyer with a different lending option. 

USDA Loans

Unlike FHA loans, USDA loans require no downpayment. You can purchase a house for 100% financing. This loan is intended to encourage buying and development outside urban areas, keeping real estate money in smaller towns and communities. There are a few requirements for a USDA loan, including an income cap (you can't make too much money), and that you intend to live in the home and not use it as a business or rental property. A good credit score is also important. 

VA Loans

VA loans are loans for veterans who have served active duty or who have completed a number of years of reserve service. These make it easy for veterans to get a home with 100% financing, no penalties, and lower interest rates than a conventional loan. You can, of course, bring a downpayment to the sale, but the VA also requires that a property is in good condition for the sale. 

Lease With Option to Purchase

If none of these options work for you, look into properties that allow a lease with option to purchase. You still need a large upfront fee to start the agreement, but after leasing for a period of time, you can use the option fee as a downpayment to buy the house. These agreements can be good for people who need a home but do not have the best credit. 

To learn more about the home buying process, contact a real estate company like RE/MAX ORANGE COUNTY EAST