New Home Purchase Financing
April 13, 2015 | Michele Langley
Financing a New Home Purchase
Are you interested in buying a home in Raleigh NC? If you are thinking of purchase a dream home in Raleigh, Cary, Wake Forest, Clayton or any of the great communities surrounding the Research Triangle Park, you are probably wondering how to finance the purchase of your new home in North Carolina. Homes for sale in Raleigh can be bought through a wide variety of financing options, however, each potential homeowner should make sure that they are well- informed as to what their options are and what obligations they entail.
The first thing to understand when purchasing a home in the Raleigh area is what types of loans and financing options are available to you. We will discuss a brief overview of the types of loans that you might use to purchase your home, but be sure to reach out to us so we can connect you with a mortgage broker who can with more detailed information and evaluate for your home buying options.
Federally-backed FHA Loans are often thought of as first-time home buyer loans. However, anyone who meets the required guidelines can qualify. One of the biggest requirements is that the borrower must be buying the home as an owner/occupant. These loans allow higher debt ratios and are usually more forgiving of poor credit scores. In addition to the list, they generally have lower requirements for a down payment. In fact, down payments as low as 3.5% are allowed. However, due to their low down payment requirements, they usually have an upfront mortgage insurance premium. This MIP is financed into the beginning of the loan and requires a monthly payment.
In order to qualify for a VA loan, the homebuyer must be eligible through their services in the US military. In order to qualify for a VA loan, the veteran must first obtain a Certificate of Eligibility from the Veterans Administration. These type of loans have the highest debt ratio of all and they are also the only loan that can be legally assumed by another buyer without the existing lender’s prior permission. These loans also allow the seller to pay all of the closing costs, however, the sales price is usually adjusted to reflect this contribution.
FHA loans have a big advantage because the required down payment can be gifted from a relative, which allows someone without a down payment to purchase a home. In addition to this, certain circumstances dictate that the homebuyer can have a co-signer/co-borrower who is not a resident of the property in question. Unfortunately, the disadvantage of this type of loan is that there is a maximum loan limit for each geographical area.
Unlike FHA and VA loans, conventional loans are not backed by the government. This type of loan is most likely the best bet for anyone with a 10% to 20% down payment. Conventional loans offer a wider range of loan products and allow higher loan limits. However, they have more strict underwriting rules and banks are likely to impose additional fees. It is also possible to qualify for a conventional home loan with less than 10% for a down payment, but it will require high private mortgage insurance premiums.
First-Time Home Buyer Loans
There are some great loans for first-time home buyers. This is typically referred to as a “state money” loan. This type of loan generally runs ½% to ¾% below the current market rate. There is also the possibility of receiving a state contribution towards the first-time home buyer’s down payment.
Contact Michele Langley, your local Raleigh Realtor, and her expert agents at Modern Living Home Team to discuss your home buying options.