homes

4 of the Most Common Types of Mortgages

With Toby Stanfield and Brittni Cooke of Highlands Residential Mortgage

Before buying a home, you first have to know how you’re going to pay for it. For many, that may seem like a no-brainer, but a lot of us get excited at the prospect of owning a new home, and want to start house shopping before we even know what we can afford.

When it comes to figuring out financing, most people don’t even know where to begin, which is part of the reason so many jump to calling a Realtor to show them homes. There is nothing wrong with calling a Realtor first, but you should know one of the first questions a good agent will ask you is, “Are you pre-approved for a loan?” No need to get discouraged if you haven’t been pre-approved! A good agent will also be able to refer you to a reputable lender if you don’t already have someone to turn to. But, something else you might be wondering is, what kinds of mortgages are there?

You may be thinking that a loan is a loan, but not all loans are created equal, and for good reason. Below, read on to find out how the four most common types of loans in North Carolina (and most of the United States) work.

Conventional

Conventional loans tend to be the most common type of mortgages people receive when financing a new home. A lender will look at all the usual things to find out if you qualify such as your finances and credit history, however to receive a conventional loan, you have to have a very good credit score to get the best interest rate.

So, what makes a good credit score?

According to Brittni Cooke from Highlands Residential Mortgage, the average “good” credit score that will help you land that conventional loan is around no less than a 700. Additionally, lenders will not only look at your score, but also your history of credit usage to determine if you are indeed eligible. Lenders will also look at your debt-to-income ratio to help you get the best minimum down payment possible and make sure you can actually afford to pay an extra monthly bill.

Conventional loans are also considered less risky when it comes to the home-buying process once it is under contract since it has a faster processing time due to their being less restrictions on the property (more on that later).

FHA

FHA stands for “Federal Housing Administration”, which is the government department created to help low-income individuals and families in the United States obtain loans with lower credit scores and down payments. Technically, the FHA does not actually pay out any money for the loan, but backs the funding, however borrowers must pay for their own mortgage insurance.

This type of loan enables lower-to-middle class families to get the best possible rates with typically a minimum credit score of 640 and down payment of as little as 3.5%, compared to 10- 20% on conventional.

The downside to this type of mortgage is the appraisals are notoriously “picky” and things as minor as chipping paint or rotting wood, to as major as mold or an aging roof, can hold up the entire process. However, according to Toby Stanfield of Highlands Residential Mortgage, people are most commonly qualified for an FHA loan, making it still one of the most popular and favorable loans for buyers to get.

VA

As the name of this loan suggests, it is exclusive for those who serve or have served in the US military. Qualified veterans can obtain financing from the Department of Veterans Affairs for no down payment at all! Often, only a small fee will have to be paid, which can even be rolled into the mortgage if the buyer prefers.

For a veteran, this is an obvious mortgage possibility, especially if they have a low or fixed incomes. Borrowers will still have to pay closing costs and earnest money, and the home they pick will have to meet the VA’s standards like in an FHA situation, but it is definitely worth applying for if you have served for at least 90 days consecutively.

USDA

USDA stands for the “United States Department of Agriculture”, and is designed for low-income families living in rural areas. Backed by the Federal Government, properties must meet the USDA’s minimum requirements to be considered a rural area, and can be obtained with little or no down payment.

These types of loans are similar to FHA and VA in the way that they work, but your debt must not exceed your income by more than 41%. Also, like in an FHA loan, borrowers must purchase their own mortgage insurance. To see if the area you’re interested in purchasing in meets a USDA loan’s guidelines, it must have a population of no more than 25,000, according to Toby Stanfield. Click Here to find out if a property or area qualifies.

These are the 4 main types of loans available for first-time homebuyers, however you do not have to be a first-time homebuyer to qualify for any of these programs. Call or email Brittni Cooke (336) 272-3061 or at bcooke@highlansmortgage.com today to get more information, and learn more about these financing programs as well as other options.

Why You Should Hire an Agent to Sell Your Home

One thing we can’t help but notice around Davidson County is that people around here tend to be “do-it- yourself”-ers. And by that we mean these are handy, capable people living in these parts! We prefer not to hire someone to chop down a tree, or make a fancy cake, or even change the oil in our cars. We can do all that ourselves! And there is nothing wrong with any of that. However, we also notice a lot of people are trying to sell their homes on their own as well, and trying to sell your home on your own can lead to a lot of problems you may not be ready for, or even be aware of. Problems an experienced real estate agent can help you troubleshoot and understand as they arise. For example, working with an agent helps you to price your home right, first of all. They have access to other current and past listings, so they can easily run a comparative market analysis, or CMA, to make sure you are not pricing your home too high or too low. You may think your house should be priced to sell the same as the 3 bedroom brick colonial down the street, however a lot more factors go into pricing a piece of real estate other than style and location. Another good reason to hire an agent to sell your home is probably stating the obvious: they are just more knowledgeable about it. Do you know what closing costs are? Do you know how to calculate excise tax? What happens if something comes up on the inspection that causes you to have to renegotiate- are you prepared for that? An experienced agent can navigate all those muddy waters for you, and all you have to do is sit back, relax, and nod along as they explain the process and keep you informed. Remember- we’re working for you! Here’s another factor you may not be considering: an agent doesn’t have the same emotions tied into selling your property that you do. Think about it…you may be selling the family home where your kids grew up, or you may have spent your own childhood there as well. Maybe it’s your late mother’s house, and you know she would just be rolling in her grave if you sold it for any less than exactly what she thought it was worth. You’re going to get upset if someone comes along and makes an offer 20K below what you’re asking. An agent can help manage offers coming in and present them to you the best way possible, and negotiate on your behalf. An agent will work hard to get you the best price without getting upset about it and possibly causing a potential buyer to change their mind. Yet another reason to work with an agent is you don’t want to be held responsible if something goes awry that could come back and bite you in the you-know- what. There are so many legal implications involved in selling real estate, and, yeah, you may have a good attorney on your side already, but they can and will only do so much. A realtor will be there every step of the way to make sure your selling sails stay smooth, and will also be keeping you informed through the entire process.

Consider them your personal coach, teammate, and cheerleader all in one! We’re not here just for the paycheck- we genuinely want to make sure you walk away from the deal happy and satisfied. Anymore questions? Call a local Realtor today: (336) 600-1052