Types of Las Vegas Mortgage Loans
Conventional loans are those that are not guaranteed by the government, as are FHA and VA loans. The primary guidelines for these loans come from Freddie Mac and Fannie Mae, the secondary mortgage market where most loans are sold. This type of loan usually has the most flexibility because of the wider range of loan products offered and the higher loan limits that are allowed. Investors, primary home purchasers and second/vacation home purchasers may qualify for conventional financing.
FHA loans are typically thought of as first time home buyer loans, but actually they can be used by anyone who meets the guidelines. The borrower must be purchasing the home as an owner occupant and cannot have purchased another home using an FHA loan within the previous year. FHA loans are usually more forgiving of low credit scores and allow higher debt ratios. They also have lower down payment requirements. Because of this, there is an up front mortgage insurance premium (MIP) which is financed into the loan at the start plus a monthly MIP payment.
One of the big advantages of an FHA loan is that the down payment can be a gift from a relative, allowing a buyer who has little or no down payment to purchase a property. Another advantage is that, in certain circumstances, an FHA buyer may also have a co-borrower that is not a principal resident of the property being purchased. One of the disadvantages of an FHA loan that each geographical area has a maximum loan limit that cannot be exceeded.
VA loans are available only to veterans who have VA eligibility through service in the US military. In order to obtain a VA loan, the veteran must acquire from the Veteran's Administration the Certificate of Eligibility or DD-214. VA loans allow the highest debt ratios of all loans, and the Veteran is able to literally get into a home with $1 down because the seller is allowed to pay all of the Veteran's closing costs. (Usually the sales price is adjusted to cover the cost of the seller's contribution.)
VA loans are also the only kind of loan that may be legally "assumed" by another buyer without prior permission from the existing lender by using a contract for sale. This should only be attempted with help from a competent Realtor and advice from an attorney! The terms under which this type of assumption can be done are extremely complicated and can carry risks for both buyer and seller. Until the new buyer either pays off the existing VA loan or qualifies to assume it with the lender, the veteran remains liable for the balance which is owed.
First time home buyer loans (state money)
Periodically during each year the State of Nevada will allocate funds to go towards mortgages for first time or low income homebuyers. This is called a "state money" loan and typically will run 1/2 to 3/4% lower than the current market rate. There may also be a contribution from the state towards the buyer's down payment.
State money loans allow a buyer to qualify for a better house than he might otherwise be able to afford. There are certain restrictions which apply to this loan, including maximum annual income and maximum sales price allowed. Once a property has been identified, the buyer must attend classes and wait for approval of his fund allocation. If the buyer ever moves out of the house, it must either be sold or the loan may be assumed by another buyer who must also qualify under the state guidelines. (These properties may not be turned into rental units.) Depending on how long a buyer has occupied the home, he may be required to pay a percentage of the proceeds on the home back to the state when he sells it.
A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
- all at once, in a single lump sum of cash;
- as a regular monthly cash advance;
- as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or
- as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and generally all of the owners on title to the home must be 62 years of age or older.
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Las Vegas Mortgages