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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.

The truth about an FHA appraisal

home-prices

I would have to say being on the front lines of the Phoenix Real Estate Market I am starting to see more and more listing agents afraid of offers made by buyers who are utilizing FHA financing. I thought to myself that this made no sense but I wanted to dig a little bit deeper and started asking some questions. The general consensus (from what I gathered) pointed towards value more specifically the fact that the listing agents thought the value would come in lower on an FHA appraisal versus a conventional appraisal.

If we look at today’s market where inventory is a bit scarce and a multiple offer situation is ever so common, the listing agents seem to turn their nose up to an offer made by an FHA buyer. The truth to all of this is that the value derived on an FHA appraisal is no different than that of a conventional appraisal. In other words they both utilize the same formulas to calculate the appraised value. Plain and simple right? In my opinion if the listing agent is going to accept an offer where the buyer is utilizing financing it should make no difference to the seller’s bottom line, the values should be the same.

Now, where the appraisals are different; the HUD minimum property standards for an FHA appraisal are much more stringent or strict and require the property be in much better condition versus Fannie Mae’s minimum property standards for a conventional appraisal. Could this be the deciding factor? If the property needs a bit of work and may not meet HUD minimum property standards I can see an educated listing agent being very hesitant to accept an offer from a buyer utilizing FHA financing. To reiterate my point again if the property is in “tip top” shape there should be no difference in what financed offer the listing agent and seller accept as the value will be calculated the same. Comparable sales are comparable sales. If the property does have issues and the buyer only qualifies for FHA financing I do have some tricks up my sleeve to still make that FHA loan happen, but that folks is a story for another time so stay tuned.

Another way that the appraisals are different is the fact that an FHA appraisal will stick to the property for six months. An example would be if an FHA buyer orders an appraisal and decides to cancel his/her offer that value and appraisal will stick to the property for six months. This means that if the seller accepts another offer from an FHA buyer within this six-month time frame the current appraised value will be that of the appraisal that was already completed. Again this has nothing to do with the FHA appraised value being different from any other type of appraisal but in my opinion if the property is in great shape there should be no discrimination between an FHA or conventional buyer.

-Justin, Electric Loan Officer

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