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Loan Options For Home Buyers

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Buying a home can be extremely overwhelming. The process can cause great degrees of stress and worry until it is finally finished. Luckily, there are several programs and businesses that can make the entire ordeal easier on you. This guide goes over some of those programs and other tips for purchasing your first home.

Bank Loans

Many people start at their bank when they are looking for a mortgage loan. The bank has various loan programs that they can offer you, with different interest rates and terms depending on the one you use. Most banks will usually require at least 20% of the loan request as a down payment before they will approve the loan. The down payment can be gifted by friends and family members if the person seeking the loan doesn't have the whole amount.

Freddie Mac/Fannie Mae

Freddie Mac or Fannie Mae loans are through entities sponsored by the government. They are designed for low-income families who aren't ideal for regular bank loans with high down payments and excellent credit. With Freddie Mac or Fannie Mae, the down payments can be as low as 3% of the required amount, saving the person thousands of dollars.

USDA

The USDA loan is through the United States Department of Agriculture. The loan is guaranteed through the USDA with a fixed mortgage payment and no down payment needed. You don't need a certain credit score to qualify, but people with scores over 600 will usually pass, whereas people with lower scores may go through a more extensive application process. The loan is typically aimed towards people in rural areas, like farms, but is not limited to them.

FHA

The Federal Housing Administration, or FHA, is one of the most common loan programs used. The agency is part of the United States Department of Housing and Urban Development, or HUD, and is typically called a "HUD loan." The FHA loan provides mortgage lenders with protection when they give you the loan, so the bank itself doesn't loss money if you don't pay your mortgage and it goes to foreclosure. The down payments for the loans are usually 3% of the mortgage amount with credit scores over 600. Anything lower than that may by anywhere up to 10% of the amount.

Conclusion

If you aren't sure which loan program is best for you, a good place to start is a bank or credit union, like Coldwell Banker George Realty. They will look at your credit score and income and determine if you are suited for any of the above programs.


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