The McNitt-Lanning Team Financing

Financing


Pre-Approvals


Mortgage Pre-Approvals are letters from a lender stating the type of loan and loan amount that a buyer qualifies for. A Pre-Approval has many benefits to the buyer, such as determining their potential price range, and allowing them to estimate what their monthly payment will be. In addition to these benefits, a Pre-Approval shows sellers that a buyer is serious and is required when submitting a purchase offer.


Types of Mortgages


Conventional: Conventional Mortgages are privately backed loans, that are not guaranteed or insured by any government agency. Conventional Mortgages require a 3% minimum down payment, and typically require the highest credit score. These mortgages require the borrower to carry PMI (Private Mortgage Insurance) when the borrower puts down less than 20%, but PMI can be cancelled once the borrower has 20% equity.


FHA: FHA Mortgages are backed by the Federal Housing Administration. FHA Mortgages require a minimum of a 3.5% down payment, but typically have lower credit score requirements than Conventional Mortgages. FHA Mortgages require PMI throughout the life of the loan and require an upfront Mortgage Insurance Fee of 1.75%. The FHA has rigid quality standards that the property must meet in order for an FHA Mortgage to be approved, and the property must be owner occupied.


VA: VA Mortgages are backed by the U.S. Department of Veterans Affairs. These mortgages do not have a required down payment or minimum credit score, but are only available to Veterans, Military Personnel, and their Spouses. VA Mortgages require an upfront VA Funding Fee of 1.25% to 3.3%.


USDA: USDA Mortgages are backed by the U.S. Department of Agriculture, and do not require a down payment. USDA Mortgages require low-rate PMI, which can be financed into the loan. These mortgages are only available in eligible rural areas designated by the USDA. 


Appraisals vs. Assessments


Appraisals: An appraisal is an estimate of the value of a home based on recent sales of other similar homes in the area. Lenders order appraisals to verify that the loan amount does not exceed the value of the home.


Assessments: An assessment is an estimate of the value of a home based on other similar homes in the area for the purpose of calculating property taxes.