Category: FHA Mortgage

Why Conventional Loans are Better than FHA Loans

conventional loans vs fha loans

Conventional Loans are home loans that conform to the underwriting guidelines set by the Government Sponsored Entities, Fannie Mae and Freddie Mac.  In the past, conventional loans were only for elite borrowers that had 20% or more for their down payment. Times have since changed opening up great new programs for low to middle income earners and first time homebuyers.

Why are Conventional Loans Better than FHA Loans

Conventional Loans are now an affordable option for those without the highest credit scores. Mortgage Interest Rates are currently in a tighter spread. By this I mean that the best creditor borrowers and the lower score borrowers will have an interest within 1% to 1.5% of each other.

This is helped by programs like Fannie Mae’s HomeReady Loan and Freddie Mac’s HomePossible Loan. These programs limit the loan level price adjustments (LLPAs) which increases the par offering rate. These programs also allow first time homebuyers to buy a home with only 3% down while FHA requires a minimum down payment of 3.5%.

In the past, Private Mortgage Insurance (PMI) rates would also be absurdly high for lower score borrowers seeking Conventional mortgages. With the competition between PMI companies, mortgage insurance rates have dropped significantly in the past few years. This allows Conventional loans to be very competitive with Government Insurance Loans like FHA mortgages.

Related: See our Conventional Mortgage Calculator

FHA Mortgage Insurance Cost May Cost More than Conventional Loans

Conventional loans may be a better option for homebuyers than FHA Mortgages because of the mortgage insurance savings. On Conventional loans, there is typically a monthly PMI fee if a borrower does not put a 20% down payment towards their purchase. FHA has a similar fee plus an up front charge.

Related: See our FHA Mortgage Calculator

FHA Mortgage insurance VS Private Mortgages Insurance

FHA Mortgage InsurancePrivate Mortgage Insurance
Required on all Loans Required on conventional mortgages with less than 20% down
Two Types of mortgage insurance May be dropped once loan to value is under 78%
Cannot be removed if down payment is less than 10%
What is an FHA Up Front Mortgage Insurance Premium?
May be more expensive Many options for PMI payments
Offers Reduce Premiums for First Time Homebuyer Programs

FHA Loans charge two types of Mortgage Insurance Premiums (MIP). There is Upfront Mortgage Insurance Premiums (UFMIP) which are payable to HUD at close. The UFMIP is calculated as a percentage of the original loan amount. This fee is currently set at 1.75% of the base loan amount. For example, If you borrower $200,000, the FHA UFMIP added to your loan amount is $3,500. This is an extra expense not found on Conventional Loans.

What is an FHA Annual Mortgage Insurance Premium?

The Second type of Mortgage Insurance on FHA Loans is Annual Mortgage Insurance Premiums (MIP). This calculation varies based on loan-to-value and loan term but is as high s .85% of the original loan amount. For example, if you borrowed $200,000 the annual MIP would be $200,000 * .0085 = $1,700 which is split up over 12 months and added to your monthly mortgage payment. In this example, your payment would increase by $141.67 for MIP.

April 2013, FHA made a major change which started the shift away from this loan type. They changed the way annual FHA mortgage insurance fees were charged by making FHA Mortgage Insurance Premiums payable for the life of the loan. In past years, it would drop off under certain circumstances similar to Conventional Loans when your loan was paid under 78% of the home’s value.

Conventional Loans are more Attractive to a Seller than FHA Financing

In many areas of the country, there is a shortage of homes for sale which creates a sellers market. This means that sellers can be more picky when accepting offers from buyers on their homes.

When a buyer is making an offer with FHA financing, a seller may be reluctant to accept due to additional requirements for the home’s conditions compared to Conventional Financing. Having a Conventional Loan Pre-Approval may make the difference from getting your offer accepted or getting rejected by a seller.

Why Would Anyone Still Do FHA Loans over Conventional Loans?

There are certain circumstances where FHA finance may be a better option than a Conventional Loan.

FHA Loans with Down Payment Assistance

Many Mortgage Down Payment Assistance Programs (DPA) work only in conjunction with FHA financing. If a borrower does not significant funds available or down payment, DPA programs may help the buy a home.

FHA Loans Allow for Lower Credit Scores

Conventional Loans have minimum credit score requirement of 620. If a borrower has a credit score lower than this, FHA financing may be the only option. Currently FHA allows for credit as low as a 530 with a 10% down payment or as low as 580 with only a 3.5% down payment. Many borrowers with a credit score lower credit scores may have no problems qualifying for FHA financing when Conventional loans are not an option.

FHA Loans Have Shorter Wait Periods Than Conventional Loans

FHA loans have shorter wait periods for major life events such as bankruptcy or foreclosure.

  • FHA loans only require a 2 year wait period from Chapter 7 Bankruptcy while Conventional requires 4 years.
  • FHA requires a 3 year wait period for foreclosures while Conventional Loans require 7 Years.
  • These wait periods may allow a borrower to buy a home with FHA financing while conventional is not an option.

FHA Loans allow for Higher Debt To Income Ratios than Conventional Loans

A borrower may be better off with an FHA loan over conventional financing if they have a high Debt To Income Ratio.

  • Conventional Loans typically require a borrower to have a Debt-to-Income (DTI) of 45% or less to qualify with a maximum DTI of 50%.
  • FHA is more flexible with higher debts allowing a maximum of 56.9%. Borrowers with higher debts may only qualify for FHA Loans.

FHA Streamline Refinance

If a borrower already has an FHA Loan but does not have a significant amount of equity in their home, they may qualify for a rate reduction through an FHA Streamline Refinance. This loan type may allow them to drop their rate and payments without an appraisal or documenting income and with little to no costs. This is a program unique to FHA financing and can help a borrower that purchased their home when their credit scores were lower but have since improved.

Summary of Why Conventional Loans are Better Than FHA Loans

With the current guidelines set by FHA, Fannie Mae and Freddie Mac, Conventional Loans may be a better fit for buyers than FHA loans. Conventional loans offer lower down payments of only 3% for first time homebuyers while FHA loans require 3.5% down. Mortgage insurance may be significantly cheaper on Conventional loans versus FHA loans. Lastly, submitting an offer with Conventional Financing may be more attractive to sellers over an FHA Pre-Approval.

To get more information on what loan type maybe the best fit for your situation, call a licensed loan officer today at 800-555-2098 or request information below.

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2019 FHA Loan Limits

FHA Loan Limits for 2019

FHA Loan Limits Increased for 2019

On December 14, 2018, FHA increased the FHA Loan Limits for new case numbers assigned on or after January 1, 2019. The FHA loan limits have increased from 2018 FHA loan limits of $294,515 to the new floor of $314,827 for 1 UNIT properties.

Related: See our FHA Mortgage Payment Calculator

FHA’s nationwide forward mortgage limit “floor” and “ceiling” for a one-unit property in Calendar Year 2019 are $314,827 and $726,525, respectively. The loan limits in Michigan are based on the number of units of the residence.

2019 FHA Loan and Conventional Loan Limits

MICHIGAN LOAN LIMITSFHACONVENTIONAL
1 UNIT$314,827$484,350
2 UNIT$403,125$620,200
3 UNIT$487,250$749,650
4 UNIT$605525$931,600

Michigan FHA Loan Limits

Michigan does not have any high cost areas therefore the limits for FHA Loans and Conventional Loans are the floor limits. FHA Loan limit in Michigan is $314,827. Conventional Loan Limits in Michigan is $484,350.

Michigan VA Loan Limits

VA loans in Michigan use the Conventional Loan limits of $484,350 set for 2019. All VA loans use the same conventional loan limits which are higher than FHA loan limits.

Michigan USDA Loan Limits

USDA Loans in Michigan are set at the Conventional Loan limits of $484,350 for 2019 as well. All USDA Loans use the same conventional loan limits which are higher than FHA loan limits and allow for more purchasing power.

For More Information on FHA Loan Limits

Give us a call today at 800-555-2098 or request information below!

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Select the links below for additional mortgage limits guidance for forward mortgages:

For Calendar Year 2019, the HECM maximum nationwide claim amount will be $726,525 for all areas. Refer to Mortgagee Letter 18-12 for more details.

2018 Conforming Loan Limits and FHA Loan Limits Increased

On November 28, 2017, it was announced by the Federal Housing Finance Agency, or FHFA, that for 2018 the baseline loan limit for conforming loans will increase from $424,100 to $453,100. This is due to raising house prices and real estate appreciation. According to the FHFA, from the third quarter of 2016 to the third quarter of 2017, home prices have increased at an average of 6.8%. Therefore, conforming loan limits have increased by 6.8%.

Related: 2019 Conventional Loan Limits in Michigan

How are Conforming Loan Limits Calculated?

The new Conventional Loan Limit does not apply to all areas of the United States. There are certain areas in the country that are considered to be high cost, such as Alaska and areas of California. In order for these areas to be deemed as high cost, 115% of the local median home value must exceed the baseline loan limit. In these areas, the baseline loan limit will increase by 150%. This makes the maximum loan limit for these areas $679,650, which was increased from $636,150. A map of the U.S. counties and their maximum loan limits can be found here.  There are no counties in Michigan that are considered to be a high cost area.

2018 FHA Loan Limits Increased

Staring January 1st 2018 FHA Loan Limits have increased its floor to $294,515 from $275,665. This means that buyers can purchase a home of $305,196 with the minimum down payment and still get an FHA loan. In high cost areas, FHA’s loan limit ceiling will increase to $679,650 from the current level of $636,150. In high cost areas, home buyer can purchase a home up to $704,300 and still use the minimum FHA loan down payment of 3.5%.

Do Other Loan Options Have Loan Limits?

USDA and VA loans do not have their own loan limit like FHA. These loan programs utilize Conventional loan limits set by the FHFA. VA may also allow larger loan amounts up to $1,500,000 if the borrower pays the funding fee at the closing over the 453,100 limit.

What if the Loan Size I Need Is Larger than the Loan Limits?

If the loan amount needed exceeds these limits then an option for you would be a non-conforming loan called a jumbo loan. These non-conforming loans follow a different set of guidelines and rates than conforming loans. For 2018, jumbo loans will be for loans that exceed $453,100. Riverbank Finance is also able to help with jumbo loans!

Jumbo Mortgage Loan limits

For loans over the conforming limit of $453,100, we are able to offer jumbo loans. Current Jumbo loan limits at Riverbank are set at 3 million dollars. The purchase price of a property can be above this limit however the buyer would need to pay cash for the difference. Our Jumbo loans options include 40 Year Interest Only Loans, 30 Year Fixed Rate Loans, 15 Year Fixed Rate Loans and Adjustable Rate Mortgages.

What are the Benefits of Conventional Loan Limit Increases?

Loan limits increasing is beneficial to clients as house prices rises because conventional/conforming loans offer the best rates. Higher loan limits allow borrowers to finance higher amount at low fixed rates. Jumbo loans typically do not offer as low of rates as conventional loans do which may be less attractive. Clients will have a wider range of houses they can get financed with a conventional loan. With our 97% Conventional Mortgages, a home buyer could purchase up to a $439,507 home with the minimum 3% down payment. For buyers that plan on utilizing a 20% down payment to avoid PMI, they can not purchase a home for up to $566,375 with 80% financing on a conventional loan.

To confirm the maximum loan amount you qualify for call a Riverbank Loan officer today at 800-555-2098 or request information below!

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How to avoid or get rid of PMI

Private Mortgage Insurance (PMI) protects the lender in case you default on your loan. In most cases, unless you have a 20% down payment, you would have to pay PMI. But if that sounds like one more expense you can’t afford, here are some ways you can avoid PMI or get rid of it if you’re already paying for it.

Lender-paid PMI

The way PMI usually works is that you, the borrower, would have to pay an extra fee, along with your monthly mortgage. That extra fee can really squeeze your budget, especially if it’s already tight.

However, some lenders will offer to pay your PMI. Here’s how that works: They’d pay the full amount of the PMI up front, and you’d have to pay it back in the form of interest. It would slightly increase your mortgage rate, meaning that you’d have a higher monthly payment.

To figure out whether this is a good option for you, you’ll have to calculate whether the monthly cost of PMI would be more or less than the increase to your mortgage rate if your lender chooses to pay the PMI for you. Either way, the lender isn’t really paying it — you are. It’s just being distributed differently.

20% Down Payment on a Conventional Loan

The best, and most obvious, way to avoid PMI is to have a 20% down payment on a Conventional Loan. Since you’re putting down 20%, the lender wouldn’t need that extra protection against defaults. So you’d be in the clear.

However, if you couldn’t afford a 20% down payment and had to opt for an FHA Loan, for example, you could still get rid of your PMI once you reach 20% in home equity. Some types of loans have PMI attached to them for their entire lifespan, so in that case, you’d have to refinance to a Conventional Loan when you have 20% in home equity in order to drop the PMI.

VA Loans

If you are a veteran or are currently serving in the military, you are eligible for a VA Loan. The government created this loan program so that returning military members could purchase their own home with zero down payment, low monthly payments and more flexibility than traditional loans. The best part is, VA Loans require no PMI because the government provides a guaranty on the loan in case of default. So if you qualify, you can get a 15 or 30-year fixed VA Loan with zero down and no PMI.

The gift of equity

If you are purchasing your home from a family member, you can accept a gift of equity to lower the loan-to-value ratio. A gift of equity is when a family member sells you his or her house for a lower price than the listed price, and the difference can be used to make your down payment or pay off debt so you can qualify for the loan.

You can’t use a gift of equity on a VA Loan or Jumbo Loan. With an FHA Loan, you could also get a gift of equity from your in-laws or a non-profit organization. In any case, it must come with a letter that says it’s a gift.

For more information on avoiding PMI or getting rid of PMI on your existing loan, contact Riverbank Finance at (800) 555-2098 to schedule an appointment with one of our professional loan officers.

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How can I lower my monthly mortgage payments?

So, you’ve had a home for awhile, but you feel like your budget is just too tight. You scrimp and save, but it’s never enough. If the biggest expense you have is your mortgage, maybe it’s time to refinance your mortgage.

Refinance to a lower rate

Rates are very low. Right now, for a 30-year mortgage, the fixed rate can be as low as the high 3’s to low 4’s. Fifteen-year loans may even be in the high 2’s. Refinancing may be a great way to lower your overall mortgage payments by dropping your interest rate. This could help to save you thousands over the life of your loan. If your interest rate is over 4.5% now is a great time to review refinance options.

Drop your PMI

The only type of mortgage where Private Mortgage Insurance (PMI) drops off when you have 20% equity is the Conventional loan. Other types of loans, like the FHA, require PMI for the life of the loan. PMI usually costs 0.5 or 1% of the entire loan. It protects the bank from defaults. For you, it’s an extra cost — one that, once you’ve paid off 20% of the original loan value, you can refinance to remove. While it may not seem like a lot of money, 1% of a loan over the life of a 30-year mortgage can really add up over time. 

Extend your mortgage term

One reason folks often have trouble paying their monthly mortgage is that they think that a 15-year term is better than the 30-year. While it’s true that a 30-year mortgage takes longer to pay off, the monthly payments are lower. If your goal is a lower monthly budget, switching from a 15 to a 30-year will certainly do the trick. The only downside is the term of the loan is longer if you pay the minimum payments.

Also, if you already have a 30-year mortgage and refinance to a new one, you could still reduce your monthly payments.

Refinance from an FHA loan to a Conventional loan

You may have started with bad or low credit when you initially bought your house and had an FHA loan as the result. Or maybe you didn’t have enough money for a larger down payment. As your credit improves, you could have an opportunity to refinance your loan to a conventional mortgage. There are two advantages when refinancing an FHA to a Conventional loan: First, you could get rid of the Private Mortgage Insurance payments if you’ve paid 20% of the mortgage. Secondly, the interest rates for a Conventional loan may be lower than they are for FHA loans.

If you are thinking about refinancing your mortgage, contact one of our professional loan officers at 800-555-2098 to schedule an appointment. We can sit down and look at your financial situation and help you figure out the best way to lower your monthly mortgage payments.

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Can I get a co-signer for a home loan?

Things to avoid when buying a home in Michigan.

If you want to buy a house, you have to meet certain requirements in order to secure a mortgage. What if you do not meet the requirements for income and credit history? The good news is you can ask someone to cosign on your loan, even if they won’t live at your house. Here’s what you need to know about having a cosigner on your loan.

Who can be a cosigner on my loan?

Depending on what kind of loan you are applying for, you’ll have to abide by certain regulations on who can serve as a cosigner.

With a conventional or FHA loan, you may ask your spouse, a relative, or anyone who’s going to co-own the home with you to cosign the loan. The cosigner will need to sign an application and provide full financial information to your mortgage company.

Conventional Mortgage Cosigners

A cosigner on a conventional loan may be beneficial to help get your loan approved. The cosigner will have to be related or have a close familial relationship with you that can be clearly documented for underwriting.

FHA Mortgage Cosigners

A cosigner for an FHA loan may help to get your loan approved. Similar to Conventional mortgages, the cosigner must be related or have a documented close relationship. The cosigner may be a non-occupying co-borrower meaning that they do not have to occupy the property as their primary residence to qualify. FHA cosigning example: Mother or Father cosigning for this child’s first home.

VA Loan Cosigners

If you’re applying for a VA loan with a cosigner, the requirements are a little different. If you are married, the cosigner must be your spouse. If you are not married, the cosigner can be another unmarried veteran who’s eligible for the VA Loan. You can ask a civilian (such as your parent or significant other) to cosign the loan, but the guaranty will only apply to your portion. That means you will likely need a down payment on the loan.

What are the requirements for a mortgage cosigner?

Before you ask someone to cosign on your loan, make sure the person has a good credit history and adequate income. Otherwise, they’re only going to hinder the loan process for you. For example, if you did not make enough income to qualify on your own, your co-signer will need to make enough income to cover their own liabilities and also add enough income to make up the difference for you.

Cosigner Requirements:

  • Good Credit History
  • No recent bankruptcies or foreclosures
  • Good Jobs History
  • Low expenses
  • Documentation of Income
  • Relationship to you

Remember, the cosigner is just as responsible for paying the loan as you are. So if you default for any reason, they will have to make the mortgage payments.

Why won’t a cosigner help get my loan get approved?

Getting a cosigning on a mortgage allows you to qualify based off your joint income and credit history however all applicants must meet the minimum criteria for approval. Generally speaking, when an underwriter reviews your file, they will go of worst case scenario. This means that if your credit score is too low to qualify, getting a cosigner will not help you because the qualifying credit score would still be yours.

A cosigner will not be helpful if you did not qualify for financing independently due to major derogatory events such as a recent foreclosure or bankruptcy. The wait times for these major credit events is based off the most recent event date. All parties applying for financing must meet the minimum credit scores and wait periods to be eligible for financing.

How can I get a loan without a cosigner?

If you can not find someone who can (or will) be a cosigner for you, or you do not want to ask anyone else to share responsibility for your loan, the lender will require you to fix your credit history and/or increase your income before you can acquire the loan. You may still be eligible for loans with flexible credit such as low credit FHA mortgages.

To improve your credit, you may want to take out a small line of credit that you can repay to build positive credit history. You should also check your credit report to find out if there are any errors. You can correct those by contacting the creditor or going straight to the credit reporting agency.

You could also work on saving more money toward a down payment so you can borrow less on your home loan or have a larger down payment available which may help with loan approval. Another way to improve your chances of getting the loan is to pay down your debt, including your student loans to lower your current monthly expenses.

If you are not sure whether you need a cosigner, contact Riverbank Finance at (800) 555-2098 to make an appointment with one of our professional loan officers. We can help review cosigner options for all of our mortgage options.

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How High Will Interest Rates Go This Year?

Mortgage interest rates have been slowly increasing since they plummeted following the 2008 financial crisis. Twice this year already, the Federal Reserve has raised interest rates, which, in turn, raises the rate at which banks loan out money for mortgages. But are they done raising rates this year, or could more hikes be on the way?

Will the FED raise interest rates?

Here’s a few ways you can tell a rate increase is on the way:

  • Language of the FED. This past week on Wednesday, the Federal Reserve met and decided not to raise rates this month but indicated that a raise is “coming soon.” Most analysts take the language in that statement to mean before the end of 2017, another increase will be on the way, possibly as soon as September.
  • How markets reacted to the last increase. Instability in the marketplace often translates to more caution on the part of the FED. According to their own account, the last increase went with little to no instability.
  • PCE. Personal Consumption Expenditure, or PCE, is the FEDs favorite measure of economic health for the economy. Two-thirds of all economic spending (or growth in the FED’s mind) is measured in this index.
    • While this acronym is pretty simple, the index itself is multi-faceted. It Includes “Durable Goods,” like cars and houses; “non-durables,” like food and clothing; and services.
  • Inflation. Inflation is the rising cost of goods and services. Usually this happens for three reasons:
    • Wages are increasing, thus making things more expensive to make and sell. (The average wage for an employee in Grand Rapids, Michigan, falls around $45-50,000 annually.
    • Increased demand, due to credit being more accessible.
    • Government monetary policy (printing money).

How Much Will Interest Rates Rise This Year?

Interest rates before the economic crisis in 2007 were around 6.5%. Currently interest rates are at 1.25%. At the beginning of the year, the FED had hoped to get the rate back to 2%, but, at the last meeting, FED officials revised that to 1.5% due to the size of economic growth this year. We are growing, but slower than they forecasted.

What are current mortgage rates?

Mortgage rates have been hovering around the 4% range for 2017 for a 30 year fixed rate mortgage. The rates for home loans shot up to the mid to low 4’s at the beginning of this year but have slowly dropped back down to the range it has been at for the past few years.   The exact mortgage rate will depend on your specific situation including loan amount, loan-to-value ratio, credit score and loan program.

Related: Current Mortgage Rates

Should I buy a house before interest rates go up?

Interest rates will likely not rise to 2% this year. That doesn’t mean the FED won’t try to reach that goal next year, or perhaps go even higher than that. So, while rates are slowly rising, they are still lower than they were ten years ago for those searching for a mortgage.

For West Michigan, the rates being this low means an increase in demand for new homes. While rates have ticked up, the housing boom hasn’t slowed. If you want to take advantage of interest rates before they rise again, speak with a loan officer about your mortgage options. Call Riverbank Finance at (800) 555-2098.

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Why You Shouldn’t Buy The Cheapest Home

If you don’t have a lot of money and you’re in the market for a new house, you may be tempted to buy the cheapest home you find with the intention of fixing it up. However, just because a house is cheap doesn’t mean it’s a wise investment. Here are a few things to watch out for when considering the cheapest home:

Less Money, More Problems

The cheapest home is usually cheap for a reason. It’s always wise to hire a professional to inspect the home before you buy it, just in case the house has any serious issues. Ugly paint colors and outdated carpeting are easy, cosmetic fixes, but structural problems could turn your “new” home into a money pit. Why buy an $80,000 home with $20,000 in repairs, when you can buy a $100,000 home that is move-in ready and save yourself the trouble?

Not Livable? Not Approved

When you buy a home with a conventional mortgage, the appraiser will inspect the house to figure out its market value. When you buy a home with an FHA mortgage, the appraiser will inspect the house to find out its market value and to make sure it meets the Federal Housing and Urban Development (HUD) standards for health and safety. That means it has to be livable for everyone moving into the home.

Here are a few things they look for in the appraisal, according to HUD guidelines:

  • They want to make sure that the lot is graded so that any moisture would drain away from the house and not flood it.
  • Bedrooms must have some kind of access to the outside, so that everyone can escape in case of a fire. Bedroom windows are acceptable, as long as they’re large enough for a person to fit through them.
  • Lead-based paint is still present in many homes built before 1978, and it still poses a health risk. If there’s any damaged paint, including peeling or chipping, you’ll have to get it fixed in order for the loan to get approved.
  • Steps and stairways must have handrails.
  • The heating system must be sufficient enough for the home to be comfortable for its occupants and good for their health.
  • The roof must be in acceptable condition, without leaks and moisture, and should be easy enough to maintain in the future.
  • The foundation also must be able to withstand any normal amount of weight placed on it, and it should be in acceptable condition.

Generally, if you’re buying a cheaper home and you know it’s going to need some fixing, just make sure you’re not buying something that’s going to give you more headaches than it’s worth. If you’re going to spend that much money on repairs, you might as well buy a slightly more expensive home that you can move into comfortably.

For more information on the FHA loan or to find out whether the home you’re considering fits the livability guidelines, contact one of our mortgage officers at (800) 555-2098.

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5 Mortgage Myths that are no Longer True

While it can be useful to listen to the advice from others who have gotten a mortgage, you might have heard some wrong information. Or, at the very least, dated information. Here are 5 rules that no longer are true for getting a mortgage:

1. You need a 20% down payment.

I recently spoke to my grandmother about her family’s first home purchase. She told me that they didn’t get a mortgage because, at the time they bought their home, mortgage rates were at a whopping 12%. My parents often warned me that you need to save at least 20% to make a down payment on a house. Fortunately, rates are not 12% anymore, and you don’t need a 20% down payment. Some loans don’t require a down payment at all.

Related: Conventional 1% Down Mortgage

2. Your credit score has to be perfect.

We’ve all made mistakes. Some of us have paid our credit cards late or forgot a medical bill. Those mistakes can wind up hurting your credit score. But the good news is, you don’t need a score of 750 to score a loan anymore! Riverbank Finance has helped borrowers with scores as low as 580 obtain loans.

3. You can’t have student debt.

It used to be assumed that you couldn’t get a loan until that festering student loan from college was paid off. Not true! Student loan debt is no longer a hindrance from acquiring the loan you need for your home. Guidelines are becoming easier to qualify for a mortgage with student loan debt. While our loan officers will need to know how much you owe and the type of loan you are seeking, having student debt isn’t a dead end.

4. Pay it off as fast as you can.

There are numerous “Get out of Debt” gurus who advocate paying off debts aggressively. To some of them, a success story is when a family scrimps and saves to pay off their mortgage within 5 years of buying their home. While paying off a mortgage is always the right thing to do, there are wrong ways to go about doing so: In order for this particular family to pay theirs off, they stopped paying into their 401k, their college savings for their kids, and saving in general. That was not the best plan, because they stopped preparing for their future.

If you want to pay off your mortgage quickly, you must also consider early prepayment penalties. Some loans have rules as to how much a borrower can pay back early. Pay too much, and that money may go to just eating a fee instead of eating away at your interest.

5. Buy the most expensive house you can.

On the surface, buying the most expensive house you can afford seems like a good idea. A home is an investment, after all. Really, when sitting down with one of our loan officers, what you’ll find is they’ll ask questions to help fit what you can afford and what you need into a mortgage. You may not need a home with 6 bedrooms, 4 bathrooms, and 20 acres of land. Think of the upkeep you’ll need to budget for landscaping alone.

It’s important to be upfront about the kind of needs you have when seeking a loan. Schedule an appointment with one of our mortgage professionals at (800) 555-2098 for more information.

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Buy A House with a Small Down Payment

If you are a first-time homebuyer, getting a mortgage may seem overwhelming — especially with all the different options available. Maybe you don’t have a lot of money for a down payment or your credit isn’t great. The good news is, you can still qualify for a home loan. Here are 4 low or no down payment options that can help you, as a first-time homebuyer, get into the house of your dreams.

FHA Loan

With an FHA loan, all you need is a 3.5% minimum down payment to buy your first home. Because the Federal Housing Administration backs the FHA loan, the qualifications are a bit more lenient. People who have no established credit or small savings for a down payment, and even a credit score as low as 580 can qualify. The FHA loan is also available to immigrants who have a Visa or Green Card, as well as those who have gaps in their employment.

It’s also easier to qualify for an FHA loan if you’ve filed for bankruptcy. With a conventional loan, you have to wait four years after filing Chapter 7 to apply for a mortgage. With the FHA loan, you only have to wait two years. If you filed for Chapter 13, you only have to wait one year. You can also get an FHA loan three years after being foreclosed on your previous property.

VA Loan

The government created the VA loan to provide home ownership to veterans and military personnel. Like the FHA loan, the government backs the VA loan for extra security, so qualifying is easier. To qualify, you must get a certificate of eligibility from the Veterans Administration. Having bad credit may not hinder you from getting approved. VA loans require no down payment or Private Mortgage Insurance (PMI). Veterans can choose either a 30-year fixed VA loan or a 15-year fixed VA loan for up to $424,100. They may also get a cash-out refinance of up to 100% of their home.

USDA Rural Development Loan

For those wishing to buy a home in a rural area, the USDA Rural Development Loan requires zero down payment, making it great for first-time home buyers. The government also backs this loan for added security, so there’s low or no PMI attached to it. You only have to pay a 1% guarantee fee upfront and 0.5% each year after that. That’s less than the 1.75% up front and 0.85% each year with the FHA loan. If you’ve recently filed for bankruptcy or were foreclosed, you won’t have to wait too long to qualify for a USDA loan.

Conventional 1% Down Mortgage

Important Update! Last date for loan submissions is 5/31/2018. Program is being discontinued.

Riverbank Finance offers homebuyers a way to put only 1% down on a home and still get a conventional mortgage. In this case, the home buyer puts 1% down and the lender (Riverbank Finance) contributes 2%, giving home buyer 3% equity when closing on the home. Freddie Mac created this option to make homes more affordable for new buyers. It allows people to buy a new home for, essentially, the cost of one month’s rent and avoid PMI altogether or drop PMI in the future. Your 1% down payment may be a gift from someone, you must have at least a 700 FICO score, and your debt-to-income (DTI) ratio is limited to 43%.

For more information or to speak with a loan officer about any of these mortgage options, call Riverbank Finance at (800) 555-2098.

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