What Kind of Financing Do You Qualify for?

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Today I’m joined by Rick Barrick, the Branch Manager of the Bank of England Cincinnati Branch, to discuss financing options for home buyers.

As far as the types of financing that exist, the first determination of what type of loan program you use depends on your credit score. The second determination is the down payment amount. There are certain loan programs that require zero down payment, such as a USDA loan. As long as your house is qualified for a USDA loan and your credit score is over the minimum needed, then you can do a USDA loan with no money down. USDA loans, however, are only applicable to rural areas, so the address of the property has to qualify first.

USDA loans and VA loans are the main types of financing to use that require no down payment, but there are other programs available with down payment assistance. An FHA loan, for example, requires a minimum of 3.5% down, but you can do down payment assistance of 3%, so you only end up paying 0.5% down. This kind of loan is both credit score-driven and income-driven, so there are income limits that you have to meet to qualify for it.

If you have a credit score of more than 700 and put between 5% and 20% down, you can qualify for a conventional loan. If you’re a first-time home buyer, a conventional loan requires as little as 3% down. If your credit score is lower, perhaps closer to 600, you’ll probably be looking at an FHA loan, which is the 3.5% down payment standard. However, this is far from bad news, as interest rates aren’t really affected by credit scores with an FHA loan. Right now, you’re in a range of 3.5% to 4% for an interest rate. In Rick’s opinion, rates will likely stay in that range for the foreseeable future.  

The benefit to putting more money down instead of keeping it in the market is the ability to afford private mortgage insurance. By putting at least 20% down, you will avoid private mortgage insurance. If you do go under 20% down, you will have private mortgage insurance on the loan. You always have the option of getting rid of the private mortgage insurance, but that does come at a higher interest rate. An additional benefit of this is the equity you’re able to build.

If you have any questions for Rick, you can visit his branch’s website at www.boecincinnati.com or give him a call at (513) 229-9660.

If you have any questions for me, please don’t hesitate to give me a call or shoot me an email. I’m happy to help in any way I can!

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