Are you an aspiring VA or FHA first time home buyer? What actually are your loan options?
Yes, it is true that buying a new house is one of the most exciting events in one’s life. After spending an ample amount of time in a rented home, you finally want to own a space of your own. But for those who are opting for financing solutions to buy a house, some hesitation and indecisiveness is natural.
It is an ordinary feeling when infinite questions start popping up in your mind as soon as someone brings FHA and VA loan options to your notice.
Mentioned below are a few common questions that you surely want to be answered pertaining to FHA and VA loans:
These loans were introduced by Federal Housing Authority in 1934 to assist people in buying a house of their own. As a buyer, you must make an upfront payment of at least 3.5% of the loan amount. Such loans are meant to support lower and middle income groups with a weak credit background.
These loans were launched by Veterans Administration back in 1944. The purpose behind such loans is to aid the veterans and/or their surviving partner with government supported mortgage. Such loans do not require any down payment.
The prime purpose behind the initiation of these loan options was to assist people who are not financially strong enough to buy a house on their own. This government support has helped many Americans and is gaining widespread popularity.
For FHA loans, the limit varies according to the locality where you will be buying a house. For VA loans, there not any restrictions apart from the fact that your lender will not go beyond the loan limits held by VA County. In case the loan surpasses the predesigned limits, the down payment might be applicable.
FHA has set a minimum limit of 500 credit score in order to qualify for FHA loan; although a score below 620 is considered ‘subprime’. Therefore, it is better if you apply with a score of 620 and above. VA doesn’t require you to have a high credit score, but some lenders prefer to lend you if your score is 620 or more. So, it is a good idea if you manage to obtain high credit scores as it brings down the interest rate in your favor.
Yes, VA loans require appraisal. This is merely for your benefit. The idea is to ensure that you are living in space that is worth the amount you have paid. Appraisals also take place to ensure that you are not using the house as a means of earning. In case of FHA loans, a professional conducts the appraisal of the house to ensure that there is a match between the house’s worth and the appealed loan amount. An FHA appraisal stays in record of the agency for a period of no more than 6 months.
(READ ALSO: FHA for First Time and Repeat Homebuyers)