Hey this is USDA Loan Info again! In this blog post and like most of our blog we’re comparing conventional loans to FHA loans to VA loans to USDA Loans in West Chester and finding out exactly which one’s the best one?
Which Loan Are We Talking about and is the USDA Loan in West Chester right for you?
You know so many consumers are curious. Which type of Mortgage Lender in West Chester provider loan is best for me?
Today I want to help you figure out which one is going to benefit you and your family the most, for you a short-term and/or long-term goals because it’s different for everybody.
Now there are advantages to each one of these USDA loans in West Chester so some have lower interest rates, some have lower fees there’s all kinds of different things to think about!
Now most people have a tendency to just look at one thing. The payment! And if you’re going to be going for pre-qualification on USDA Loans in Pennsylvania and surrounding areas, we have to set the score straight.
Which is cheaper?
Well, it’s understandable when you’re buying a house you say, hey which which payment is cheaper?
But, again how long you gonna be in that house?
Is there PMI? Will the PMI disappear?
When will it disappear?
If the PMI is gonna disappear in five years butI’m gonna be here in 20 years, maybe this other loan is better a long term! So we have to look at these things as a whole. So now you can see why USDA Loans are appealing.
Now people ask you all the time what’s today’s interest rate?
It’s impossible to answer that question, because your finances and every person’s finances are as different as fingerprints!
When we look at the whole situation you have to understand that all these items, represent different risks to the lender and the higher the risk the higher the interest rate!
The lower the risk for example if you put a lot more money down, obviously a lower risk right?
Or if you have a higher FICO score lower risk, right?
Well we have to look at these things as a whole to help you determine what interest rate you’re gonna get and that also helps determine which program is right for you!
Okay now it’s time we’re gonna get into the nitty-gritty we’re gonna get into the comparison. Number one – conventional loan. A conventional loan has a minimum of a 620 FICO Score Credit score if you’re not sure what a FICO score is that is your mortgage credit score.
Now on an FHA loan vs USDA some lenders go as low as a 500 my company goes down to a 550 the truth is nobody gets approved at 500 anyway and on a VA loan we’re also looking at the same thing many lenders go to 500 company goes to 550.
PMI and Mortgage Insurance is Called MIP
Okay PMI mortgage insurance and on FHA in West Chester it’s called MIP mortgage insurance premium now on a conventional loan,
What happens is it is very very dependent on what is your credit score somebody with a very high credit score might have a very low mortgage insurance payment, but if you have a 620 FICO score your mortgage insurance payment could be way high.
At least according to USDA Loan Credit Eligibility Guidelines.
Now on FHA: FHA has pretty much standardized, here is your MIP rate remember they’re the same thing they just call them something else here’s your MIP rate it doesn’t matter if you have a 620 a 580 a 550 or 800 FICO score makes no difference you’re gonna pay the same rate.
On a VA loan great news no PMI no MIP you got that one. Okay we’re almost halfway through the post so hit the subscribe button and hit the like button I appreciate that now if you’d like to comment, I will answer every single question personally and of course you’re welcome to share this with anybody you think it’s valuable for!
Mortgage USDA Loans and Debt Ratio
A debt ratio is the percentage of your gross. Gross income is before they take taxes out.
A percentage of your gross income to your debt. Now on a conventional loan with a high FICO score they’re gonna allow you or a 50% that includes your car payment, your credit cards, student loans, alimony, child support.
All those kind of things plus the new house payment, that should be no more than 50% now if you have a lowerFICO score, it’s probably gonna be 45% that’s how conventional works.
Now let’s take a look at FHA with a 580 FICO score or above, here’s what’s basically going to happen. You’re gonna probably be approved to a 56. 99%let’s call it 57%, again that includes all your debts plus the house payment as a payment.
Lastly we have a VA loan. Now a VA loan works very very different it looks at how much money is left over after paying all this stuff.
Conventional Loan | FHA Loan | VA Loan (Mortgage) FHA
And it’s called residual income and everybody depending on what area of the country you live in and how many people in your family there’s a certain formula for it.
Now if you have 20% more than that just to give you an example if it was a thousand dollars but you have 20% more $1200 and a high FICO score you may even go up to 60 or 65% debt ratio which is unbelievable and its highest in the whole industry.
Interest rate on a conventional loan you’re often going to hear Fannie Mae, Freddie Mac those are conventional loans. On a conventional loan you are gonna have a higher interest rate than either FHA or VA.
On an FHA loan it’s lower than conventional and right about the same as VA they have virtually the same interest rates.
What is a USDA Loan in Pennsylvania?
Down payment on a conventional loan you’re usually looking at a 3% down payment. People ask me about a conventional loan Fannie Mae Freddie Mac yes those are conventional loans.
Now if we look at anFHA loan an FHA loan is gonna require a three and a half percent down payment as long as your FICO score is 580 or above. If it’s 579 or below it requires a 10%down payment and of course for our veterans who honorably served, we thank you!
You get a zero percent down payment loan. Okay so we talked about PMI, MIP mortgage insurance whatever you want to call it. But there’s also something called upfront mortgage insurance.
Now on a conventional loan there is no up front mortgage insurance, but those of you with a high FICO score might want to pay some, and they eliminate the monthly PMI payments forever.
So that’s a big deal and that’s only available on a conventional loan and it doesn’t make sense unless you have a really good FICO score. On an FHA loan we take the loan amount and multiply it by 1. 75 percent we have to add that to the loan amount.Hi this is USDA Loan Info, the mortgage lender in Pennsylvania specializing in USDA Loans PA! Today, we are going to teach you how to qualify for a mortgage well there's a lot of things obviously that a lender has to look at so let's go through each and every one of them. The first one that stops everybody and they get all nervous is credit. Now, some people have outstanding credit and some people hey they have challenges maybe they had late pays you know bad things happen to good people all the time and sometimes that's the reason for a low credit score sometimes it's you don't even have enough credit so let me give you a way to think about how the lender will look at your credit they say to themselves hey if this guy can't pay a $25 a month credit card are we gonna lend them three hundred thousand dollars it's a small way of thinking don't think fold up think bigger think I'm not gonna go out to dinner I'm gonna pay my bills first you pay your bills this is what my mama taught me first you pay your bills you pay the mortgage you pay all your other debts then you figure out a wheat and steak over eaten beans it's just a way to think if you think like that in a short period of time your credits gonna be good enough to fire your landlord. Okay next thing lender needs to know income well do you have job stability how long you been on your job look you could get a job and get approved the next day you really can but if you change jobs every three months well that job stability isn't there they want to see some kind of stability do they want to see income of course how do they know that you can afford to make that payment they need to know that you have the income they expect it to continue for usually three years is what they're looking for obviously you can get fire you can get laid off things could change but they have a reasonable expectation of three years going forward that the income will continue so they want to see that they'd love to see a history the stronger the history the stronger the case you could fire your landlord okay next thing they want to see downpayment they call this skin in the game if you put up your own money that you worked hard for for a down payment they say hey they got some skin in the game they're serious they're committed now if you put a zero down program and we have these zero down programs they work great for some people but it makes a little bit tougher for the underwriter to say yeah they're worth taking a shot on so we want to see a down payment sometimes people put $200,000 on a down on a four hundred thousand dollar house do they have some skin in the game it makes the underwriters decision way easier doesn't it and if a person can't put a thousand or two thousand dollars down it makes the underwriter a little nervous so take advantage of the programs save some money but be sure that you're ready to show you're committed to this transaction okay something else obviously the underwriter wants to see we need an appraisal of the property we have to know the lender needs to know that if it's a four hundred thousand dollar loan that the house isn't worth three hundred and fifty thousand dollars so the collateral is the last piece of the puzzle that they have to make sure it's worth it but that also protects you as the borrower why because if you commit to buying a house for $400,000and it appraises at three hundred and eighty thousand is that something you really want to do so this is designed to protect you and protect the lender that's a big deal okay not only do they want to see your credit but on the credit report it's a list of debts what do you mean well you have your car payment on there you have your credit cards you may have child support alimony we have to look at all the debts if you make $5,000 a month but you have $2,000a month in debt doesn't leave a whole lot for a house payment so we have to look at all the numbers versus your income so that's the last thing that they're gonna want to see how much is going out already because you're going to add on this new house payment okay so those are the five things that a lender needs to see they want to see your credit are you responsible do you pay your bills on time or do you make excuses for not paying them do you have crazy debt that's out of control that you can't handle when you add on house payment do you have income and job stability how's that going do you have five new jobs or one new job it doesn't really matter if you have two or three jobs but if you change your job on a regular basis not gonna work what else they want to see how much money you've saved what's in your 401k what's in your IRA what is in your bank do you save money do you have a financial responsibility that you are showing you are a responsible borrower those are the key things they want to see and obviously the appraisal they want to make sure the collateral is solid it protects the lender and protects you so this is Chris Trapani call me I'll help you figure it out and together we're going to fire your landlord!.
Simple example – if you have a hundred thousand dollar loan 1. 75 percent is $1,750, we’re gonna add that, so you’d actually be borrowing $101,750 upfront mortgage insurance.
Now though lastly if you’re a veteran who happens to be disabled 10 percent or more there is no up front mortgage fee that there is no VA funding fee it doesn’t exist for you.
Okay seasoning from bankruptcy many Americans through the last few years they’ve had a hard time and they did file a bankruptcy on a conventional loan 4 years must have elapsed from the discharge not from when you started but from when it was finished before you’re allowed to apply for a conventional loan.
On an FHA loan it’s only two years and on a VA loan it’s only two years. Short sale seasoning.
Well a lot of people ask what’s a short sale?
Well at a time when people owed more than the house was worth, they often went to the bank and said, hey my house is worth three hundred I owe four hundred and the bank accepted three hundred thousand dollars.
That was called a short sale.
Well if you have a conventional loan if you want to apply for a conventional loan it would be four years after a short sale.
For an FHA loan it’s three years must have elapsed from the time of the short sale and for a VA loan it’s only two years.
Again Vets win, they earned.
A foreclosure well yes some people went into really hard times on a conventional loan we are looking at seven years before you can buy a home againOn an FHA loan it’s only three years and For the vets – two years from a foreclosure okay Time back to work after an extended absence.
Well on a conventional loan there is actually no real time frame but the lender will take a look they just want to make sure it’s reasonable and everything is considered as a make sense situation you can be back to work for one month after or six months or a year off.
On an FHA loan FHA guidelines require six months back to work with pay stubs proof they’ve been back to work for six months before they’ll accept that income.
On a VA loan it varies per lender some lenders will accept right back to work some might want six months or three months a lot of them will require just get past the probationary period on the job and you’re good to go.
Occupancy on a conventional loan you can buy for a rental, you can buy for a second home if maybe you want to live in the mountains or down by the beach on the weekends or obviously for an owner-occupied property.
For a FHA and VA loan it is owner occupied.
Only. Hopefully this blog post will help you need a decision making process which loan is right for you! We have a post on USDA Loans in Pennsylvania coming up next – stop by and see if you can’t Pre-Qualify!
Confused about USDA Loans in West Chester? USDA Loan Info & Friends Has the Answer:Mortgage Matters! - Let's talk about loans. Hi, my name is Danielle Scottwith Keller Williams Realty. I'm here today with JimmyJoseph of First Lenders. Of course, you know, dealingwith first-time home buyers, even people who've been inthe buying process before, everyone wants to know what do they need to know about loans? One question I get a lot is "What's the differencebetween FHA and Conventional, also VA loans?" So, if you could just talka little bit about them. - Those are threedifferent types of loans. One, VA loans for activeslash retired veterans. That's a loan that's usedfor them through a program which is administered by the government. Then you have FHA, which is another loan program administered by the government, where it gives you flexibility in terms of your down payment, below-average credit scores, and higher debt-to-income ratios to purchase the home. It gives you flexibility inyour debt-to-income ratio as far as buying power. And Conventional, that's what we call our traditional lending, where you're allowed toput 3% to 20% down payment, and that has privatemortgage insurance, PMI. - So, how about first-time home buyers and the pre-approval process? What tips would you give for them? - For first-time home buyersit's important to use a free tool, which is Credit Karma. I think it's absolutely greatbecause it gives you an idea where you're at with your risk. However, when I'm givingout a pre-approval I collect four factors: cash, income, property, andrisk which is your credit score. - Do you have anythoughts on closing costs? People usually are veryconcerned with that. - Yeah, they should be, because usually, sometimes, they don't understand whatcomes into the closing costs. What's in the closing costs is: settlement fees, your escrow,and origination costs. It's important that you look at that and have your lender talkto you and talk through, line by line, of what's going on, what's costing you the most. Because in the end, this is what your loan isgoing to be for the future as you make your monthly payments. - So, Jimmy, what do you thinkabout new construction homes? I get that question a lot, people looking for new construction. What should people be concerned about? - They should be concernedabout two things: the taxes and making sure your lender knows what'sgoing to happen as your escrow changes. With new construction, sometimes the lenderdoes not have access to what's going on with the taxes. So it's important that youcommunicate with the tax assessor to understand when the propertyis going to be re-assessed so that when that amount is adjusted that your lender knows, so moving forward you canmake your monthly payments. What happens in come cases, lenders are not communicatingwith the tax assessors and your escrow is short and sometimes clients have a concern, like "I didn't know whathappened, what's going on?". Nevertheless, it's important that the lender, and yourself, andthe tax assessor get involved to make sure you're taxed accordingly and correctly for the new property. - Thank you so much, are there any finalthoughts you want to give to people who are, you know,just starting the process? - Yes, make sure when you're working, when you're looking for a home, or trying to figure out what you want, how you want to go about it; please speak to a realtor. They have experience, theyknow what they're doing-- - (whispers) That's me. - And they will make sure thatthey coordinate your needs to the fullest. - Okay great, thank you so much! Again, I'm Danielle Scottwith Keller Williams Realty, I'm here with JimmyJoseph from First Lenders. Thank you, bye! - Bye.
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