Purchase Loan

Home Loan Purchase Financing  is the most important step of obtaining a secure loan on your first property, second property or even investment property. There are many loan programs available, and few of them are listed below. Learn about each loan program and how it may benefit you. 

First step in determining for what you can qualify is to analyze your credit. Below you can find our calculator which will help you to give you a somewhat idea of your price range. Your credit score should be at lest 620 and above. If you credit score is less than that, than you may qualify for a FHA Loan , which requires in most cases 3% down payment.

Down Payment Requirements: If you put down less than 20%, you will have PMI  (Private Mortgage Insurance) on your mortgage. Think of this as an additional charge to your payment. When insuring a loan, the mortgage insurance Co. shares the lender's risk, but actually assumes only the primary element of risk.  This is to say the insurer does not insure the entire loan amount, but rather the upper portion of the loan.  The amount of coverage can vary, but typically it is 40% to 25% of the loan amount.   In the event of default and foreclosure, the lender, and the insurers option, will either sell the property and make a claim for reimbursement of actual losses, if any, after the face amount of the policy, or relinquish the property to the insurer and make a claim for actual losses up to the policy of amount.  Losses incurred by the lender taking the form of unpaid interest, property taxes and insurance, attorneys fees, and costs of preserving the property during the period of foreclosure and resale, as well as the expense of selling the property itself.   In return for insuring the loan, the mortgage insurance company charges an initial premium and the time to loan is made and a recurring fee, called a renewal premium that is added to the borrower's mortgage payment.  Real estate agents and lenders referred to the charges as the private mortgage insurance (PMI) or mortgage insurance premium (MIP).   To avoid PMI right away, the best start is to get a 80-10-10 Loan, 80-15-5 Loan or 80/20 Loans.  Each of them has its own benefits. Read about them to learn more.   The most commonly asked question is, if there are any "First Time Home Buyer Grants"?  First Time Home Buyer Grants are mostly given by city where you live to purchase your first home. You must occupy that property as your primary residence. If you are searching on the web to find such a lender, you may be out of luck, unless you find a lender in your city. These loan programs are available through only few lenders/brokers who know about them. Your city gives a certain portion of their total amount to you for down payment.     FHA loan features.   Any loan intended for submission for FHA insurance has a number of features that distinguish it from a conventional loan.  The most significant of these features are:   1.  Less stringent quality standards.  FHA will allow re-establishment of a credit within two years after a discharge of bankruptcy, when any judgments have been fully paid, any tax liens have been repaid, or a repayment plan has been established by the IRS, and within three years after a foreclosure has been resolved.   2.  Low down payment.  The 3% cash down payment is generally less than for a similar conventional loan.   3.  No secondary financing is allowed for the down payment.  The FHA minimum down payment for a loan must be paid by the borrower in cash.  The borrower is not allowed to resort to secondary financing from the seller or from any lender to make up any part of the down payment.  The FHA permits the use of either a nom- repayable gift of money, credit from a portion of rents from pay rent/purchase contract between a buyer and seller, or some home repairs made by the purchaser (sweat equity) to be used to satisfy the 3% down payment costs.   4. Some closing costs may cover the down payment.  While a borrower may not finance any of the closing costs along with the sales price, FHA permits the use of some closing cost to satisfy the 3% down payment requirement.   5.  FHA mortgage insurance is required for the loan regardless of the amount of the down payment.   6.  No prevent penalties are allowed.  FHA loan may be paid off in full at any time with no additional charges.  A lender is allowed to require that any such payment be made on a regular installment due date.   7.  The property must be owner occupied.  The FHA used to insure investor  properties but they have virtually eliminated all such programs.  Two-to-four unit properties qualify if they are owner occupied.   80-10-10 Loan With an 80-10-10, you get a mortgage for 80% of the purchase price, put 10% down and borrow the remaining 10%. That second loan is called a "piggy back loan." 80% - Mortgage 10% - Down payment 10% - Second loan/Piggy back loan Lenders are willing to lend you 80% of the amount if you can come up with the 20% down payment.   80-15-5 Loan 80/15/5 loans are also described as combination financing and offer a convenient way to  provide creative financing in a purchase, refinance, home improvement, or debt consolidation transaction. In a purchase transaction, a second trust is frequently used in combination with a first trust to avoid paying Private Mortgage Insurance or PMI. The first trust is always set at 80% of your purchase price which eliminates the need for PMI. We add a second trust of 15% of the purchase price and you supply 5% cash. Several advantages to consumers using this approach include: Your entire payment is tax deductible (mortgage insurance is not) You may decide to pay off your second early reducing your total payment.    80/20 Loan This combination loan uses an 80% first mortgage and a 20% second, and requires no mortgage insurance.  It allows for higher debt ratios and there are no income limitations.  This is a great loan for someone that makes too much money for first-time homebuyer programs, but still needs a no down payment loan. One good advantage to the 80/20/ loans is there is no mortgage insurance (M.I.), which is not tax deductible.

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