Different Types of Mortgages – Which One is Right For You?
FHA Loan – This is a great program for first-time home-buyers, though you do not need to be a first-time buyer to qualify for this loan. FHA loans usually require a middle credit score of 640 and tends to have more lenient guidelines than most other mortgages.
The Guidelines:
-Bankruptcies must be discharged at least two years ago
-Foreclosures and Short Sales must be at least three years ago
-Debt to income ratios are allowed up to 55%
-3.5% is required for a down payment
-Co-signers are allowed, as well as gift funds for a down-payment
CHFA Loan – This is another great program for first-time home-buyers offered by the Colorado Housing and Finance Authority. CHFA is a organization that provides down payment assistance for FHA loans.
The Guidelines are the same as FHA Loan Guidelines except:
-Only a .5% down payment is required or a minimum of $1,000 down, whichever is more
-Buyers must complete a Homebuyer Education class that can be done in person or online
VA Loan – This is a great loan program for any veteran with VA loan eligibility. Similar to FHA loans, this loan has very lenient underwriting guidelines.
The Guidelines are the same as FHA Loan Guidelines except:
-No down payment is required
-No mortgage insurance is required
Conventional Loan – This is the preferred program for any buyer with a higher credit score (at least 650) and can afford at least a 5% down payment. Ideally, a buyer would need to put 20% down for a conventional loan. However, buyers can now put as little a 5% down with various options for mortgage insurance. (Generally, a higher credit score will gain the buyer a lower price on mortgage insurance.)
The Facts:
-Bankruptcies must be discharged at least 4 years ago
-Foreclosures and short sales must be at least 7 years ago
-Debt to income ratios allowed up to 45%
-At least 5% is required for a down payment
-Co-signers are allowed in most cases, as are gift funds
-With a slightly higher credit score and a slightly larger down payment than an FHA loan, a conventional loan ends up being a much cheaper option than an FHA loan
On a final note, buyers be aware that a conventional loan is often required when purchasing a condo. If you have more in depth questions about which loan is right for you, give us a call or email and we will point you in the direction of a great loan officer! Also, if funds for your down payment are a problem, look into the Denver Mortgage Assistance Program to see if grant money is still available for home-buyers who qualify for a home, but need assistance with a down payment.
