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Category - FHA Loans

What Type of Home Loans Are Available in Phoenix Arizona

Phoenix Home Loans

What Type of Home Loans Are Available To You

The decision to buy a home is a big one, oftentimes it’ll affect you the rest of your life. Many first-time home buyers don’t know where to start. Understanding the different types of home loans available to you can give you the vital information that you need in order to make an informed decision. It’s also important to understand the pros and cons of each type of loan. As you move get ready to become a homeowner, working closely with an experienced loan officer in Phoenix Arizona can help make the process as stress-free as possible. It’s important to consider your options and look at the fine details to make sure you are making the right decision on your home loan.

Fixed vs. Adjustable Loan Types

One of the first steps to getting the best mortgage for your needs is picking between a fixed-rate or adjustable rate loan. The differences between the two types of loans are as follows:

Fixed-rate mortgages are loans that have the same exact interest rate for the life of the loan. This basically means that because your rate doesn’t change, the monthly loan payment will never change, even for long-term financing such as 30-year fixed rate loans.

Adjustable rate mortgages are a type of home loan that has an interest rate that can change throughout the life of the loan. Many of these types of mortgages will change every year after experiencing an initial period of the remaining fixed rate loan balance. This is where the hybrid effect kicks in. A hybrid adjustable rate mortgage begins with a fixed-rate interest rate, before switching to an adjustable interest rate.

Pros and Cons of Fixed & Adjustable Rate Loans

Like every loan, it’s important that you understand the pros and cons so that you can make an informed decision. Adjustable rate mortgages typically start with a lower interest rate than a fixed loan, but the adjustment period is a con. Keeping this in mind, know that your mortgage rates can change year to year, often raising as the life of the loan carries on. The best part of fixed rate loans is that your interest rate and monthly payment stays the same over the entire period of the loan. With this stability comes higher interest rates though.

Conventional Loans vs Government Insured

Once you have figured out whether you want a fixed or adjustable rate mortgage, you then need to figure out whether you prefer a conventional or government insured home loan (FHA or VA).

A conventional loan is not insured or guaranteed by the government. Conventional loans offer a 3% down option and don’t require a perfect credit score to become eligible. below are the three types of government insured loans available:

FHA Loans: The Federal Housing Administration harbors a mortgage insurance program that is directly managed by the department of housing and Urban Development or HUD. HUD is an arm of the federal government making the loan process different. FHA loans are available to everyone, not just for first time home buyers. The advantage that most people like about FHA loans is the smaller down payment, often as low as 3.5% of the overall purchase price.

A con to an FHA loan is that all home buyers will be required to purchase mortgage insurance, which increases monthly payments. To learn more about this type of loan, be sure to check out the HUD website.

VA Loans

Those who have served in the military and their families can qualify for a VA Loan. Different than an FHA loan, a portion of your loan is guaranteed by the VA. If the loan defaults, the VA pays the bank their losses up to 25% of the loan. The largest advantage of a VA loan is that borrowers can receive up to 100%. This is only available up to the conforming loan limit that is currently $417,000.

If you are looking to buy a house then you will want a qualified loan officer familiar with the Phoenix Market by your side. The Justin Haines Team has years of experience and has helped clients with all types of backgrounds and credit scores. Check out their website and get pre-approved for one of the home loan programs currently available to you.

FHA Loans with 580 credit scores | Lending is getting agressive

FHA loan with 580 fico

It is crazy to see that mortgage lending here in Phoenix is starting to get much more agressive, we are seeing loan programs to qualify borrowers a day after their foreclosures and short sales and now the credit score overlays for FHA loans have completely disappeared.

The thing is, FHA loans always required a minimum credit score of a 580, it has been this way for a while however many lenders/investors who were buying a funding these loans slapped on an overlay of 620 or 640. The investors we are working with now have removed that overlay completely and are doing FHA loans with 580 credit scoresĀ or better.

I can’t tell you how many people we have had to decline due to their credit score not meeting the minimum requirements, we have free in house credit services but sometimes they just couldn’t get the scores to where they needed to be to qualify at 620 and 640. It is a great thing that we have kept a pretty good database as it sounds like I have my work cutoff for me in regards to calling everyone who previously applied and we couldn’t get financed.

So what else is on the horizon as far as potentially “niche” type products? We have seen a couple investors out there offering stated income loans in which we thought that we would never see again although you will not find and 100% financing type products for stated income as they now require the borrowers to have a lot more skin in the game… By that I mean investing a much larger down payment, I guess they got smart and decided this is the only way to get the client from walking away from the house if they are in financing distress.

My bet is that with the market flattening out and home prices stabilizing, the investors that are buying these mortgages have made a decision that it is safe to come out and test the waters with innovative new programs. As long as they have all learned their last time from the last housing bubble and don’t come out with any of these ridiculous products like the negative am option arms I think we will maintain some consistency within the market place and it will continue to be a safe bet for homeowners.

But back to FHA loans with 580 credit scores, because Phoenix, Az was one of the places that got hit pretty hard with the housing collapse I think this is a great product to be able to offer as there are many qualified candidates who have great job history, a down payment and can afford a housing payment but are unable to meet the current credit score guidelines of 620. As far as overlays the only two things I can think of here is that we will have to follow FHA’s manual debt to income ratio max of 31/43 (contact me and I will calculate yours for you) and we do not allow any of the down payment assistance products.

As long as you meet the FHA 36months from foreclosure or delinquent short sale and 24 months from a bankruptcy seasoning periods you should be good to go to pursue a pre-approval with us, reach out now and let’s get you rolling!

 

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