If you’re looking to buy a home in Albuquerque and are looking for loan assistance, no doubt you’ve already heard about loan guarantees. A loan guarantee means that a loan has a guarantee that supports it being protected in case of default. The thing to keep in mind is that the guarantee is not that you’ll be approved for the loan, but that the lender will be protected if you default on the loan. That in itself makes it easier to get approved for the loan if you meet the criteria.
Guaranteed loans are backed by the government an offer definite advantages for home buyers who qualify. There are three government-backed mortgages – VA, FHA, and USDA.
VA loans are are for veterans and active duty military personnel who have served more than 180 days. This includes National Guard and Armed Forces Reserve members, along with un-remarried surviving spouses of those who have died while serving or as a result of a service-related injury. There is no down payment or a monthly mortgage insurance premium required. These loans are not financed by the VA. The VA provides the guidelines that lenders follow to be protected by the guarantee.
The guarantee to the lender comes into play if the loan ever goes into default. In that case, the lender is compensated at 25% of the loss. A Funding Fee paid by the borrower is what finances this guarantee. For first time buyers with no down payment, the funding fee is 2.3% of the loan amount. The good thing for buyers is that this fee is folded into the final loan amount, so it doesn’t have to be paid up front.
Another guaranteed loan is an FHA loan. These loans are aimed at first time home buyers and need at least a down payment of 3.5%. In this case, the guarantee is financed by two forms of mortgage insurance, an upfront policy rolled into the loan amount and an annual policy paid in monthly installments.
If an FHA loan defaults, the entire defaulted loan amount is covered. Just like the VA loan, the Federal Housing Administration does not handle the application but provides the guidelines. To qualify for an FHA loan, the home buyer only need to meet the requirements for income, credit, debt and other factors. Since the down payment is so low, it’s very popular with first-time buyers, although any home buyer can apply for it.
For home buyers looking to purchase rural properties, the USDA offers a similar loan guarantee. This is designed to help buyers finance properties in rural areas where conventional financing might be more difficult to find. The USDA loan is kind a of mix between the VA and FHA loan. Like the VA loan, no down payment is required. And like the FHA loan, the the guarantee is financed by two separate mortgage insurance policies. This way the lender is covered in a default.
If you feel that you qualify for any of these guaranteed loans and are looking to buy a home in Albuquerque, contact us today to see if you qualify and to help you find your next home in Albuquerque.
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