Building or buying a home can seem like a daunting task, especially if you have never done it before. It’s important to work with a lender who will meet you where you are and help enhance both your comfort level and personal knowledge about the process of getting a mortgage.
When individuals or families come to us seeking a mortgage, one of the first things we do is get them pre-qualified. During this process, we examine their credit and monthly obligations (debts) and get information about what they are wanting to do. No two situations are alike, so it is our job to help you find the mortgage that best fits your needs and sets you up for future success.
While information abounds on the Internet, nothing can take the place of advice from someone who works with the products day in and day out. Takeaway: Do your research, but get advice from the experts, too.
Below, we outline some of the most common types of mortgages we offer, along with a few key points of interest about each.
If Conventional were a flavor of ice cream, it would be Vanilla. Conventional loans are underwritten to Freddie Mac and Fannie Mae standards (yes, the big companies you hear about in the news) because they are the largest purchasers of mortgages in the US and lenders want to make sure that mortgages they make have the ability to be sold (if need be). For first-time homebuyers, there is a conventional loan with just 3% (of your purchase price) down. If both you and your co-borrower are not first-time homebuyers, the minimum required down payment is 5% down. The minimum credit score required for a conventional loan is 620 and the max debt-to-income ratio is around 48%. Conventional loan interest rates vary with the market and buyers can choose a fixed-rate (fixed for the life of the loan) product or an ARM (adjustable-rate) product. Depending on where rates are at the time you buy and the amount of time you plan to stay in your home, your lender can help you determine which product would be best for you.
FHA loans earned the reputation of the “First-time buyer” loan years ago, largely because of their low down payment and occasionally, additional flexibility for borrowers when the loan is underwritten. The minimum credit score for FHA loans is 620 and the required minimum down payment is 3.5% of the purchase price of the home. FHA loans allow for debt ratios up to 55% (min. scores of 640), so they can provide more buying power for low to moderate income borrowers. FHA loans do carry a cap on the loan amount. The current max loan amount for Wayne County, NC is $314,728. FHA loans have an up-front MIP (mortgage insurance to protect the lender) of 1.75% that can go on top of your loan PLUS a monthly MIP of .0085 of the loan amount for the life of the loan. This differs from conventional in that private mortgage insurance falls off a conventional loan when you pay the loan down to 78% of the home’s appraised value. You can choose a fixed-rate or adjustable rate product for your FHA loan. Right now, NC Community Credit Union is offering FHA loans with a $0 Origination Fee!
When someone comes to us requesting to get pre-qualified for a mortgage, one of the first things we ask is if they are qualified for VA mortgage. If you are current or prior service in the military, you may be eligible. Why are VA loans so attractive? Because they are 100% financed, i.e. NO DOWN PAYMENT for you, the borrower! Additionally, it is very customary in this market for sellers to pay all or part of a buyer’s closing costs so, theoretically, you could purchase a home with a VA loan and have NOTHING out of pocket. Wouldn’t that be great! To determine if you are VA eligible, we would pull a Certificate of Eligibility from the VA’s lender portal. If you have a current mortgage that is using your VA entitlement, we may have to determine how much eligibility you have remaining to purchase your new home. VA loans do not have private mortgage insurance but do carry a funding fee that varies from 1.25 to 3.3% of the loan amount that can go on top of your loan (percentage based on your branch of service, amount of down payment and how often you have used your VA entitlement). VA loans are backed by none other than the Veteran’s Administration and the minimum credit score required is 620. VA loans allow you to have up to a 50% debt ratio (can go to 55% if your credit score is above 640). You can finance your loan at a fixed rate for 15, 20, 25 or 30 years OR choose an 5- year ARM product where your interest rate is fixed for 5 years and adjusts each year thereafter. Right now, NC Community Credit Union is offering VA loans with a $0 Origination Fee PLUS a $1,000 lender credit!
USDA loans, also known as rural housing loans, provide 100% (NO MONEY DOWN) financing to low-to-moderate income families in certain designated rural areas. USDA loans are wonderful products, but with 100% financing for a 30-year fixed term they do carry some tighter restrictions. If you are considering this type of loan, we would first determine if you qualified income-wise. For Wayne County, NC the max household income(gross/before tax) cannot exceed $82,700 for a 1-4 person household. If you qualify income-wise, we would then use this site (link to: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp) to determine if the property you are looking at is in an eligible area. USDA loans require a minimum credit score of 640 and a debt ratio that does not exceed 41%. In addition, USDA loans require that your housing to income ratio not exceed 29%. USDA loans, similar to FHA loans carry an up-front guarantee fee of 1.00% of the loan amount that can go on top of the loan. Additionally, USDA loans have a annual fee, broken down monthly into your payments of .35% of the loan amount for the lifetime of the loan.
Construction to Permanent Loan- with just 1 Closing!
At NC Community Credit Union, we also offer loans that allow buyers to build their dream home, rather than buy it. If you are wanting to build, and your builder has asked that you secure a loan for the building process, consider our team! Unlike traditional construction to permanent loan programs, our program only requires a 5% down payment (as opposed to 10-20%) and, if you own your own land prior to building, your equity in the land can very likely serve as your down payment. If you don’t already own your land, no problem. If the builder owns the lot you are wanting he can include it in your purchase contract. If you are buying the lot from someone other than your builder, you can bring a sales contract for the land and a sales contract for the home to us, the lender. Construction to permanent loans are underwritten like traditional Conventional loans, so the minimum credit score required is 620 and the maximum debt-to-income ratio is around 48% (45% if self-employed). Worried about rates going up while you are building? We offer an extended rate cap product for our construction to permanent loans that can set a “not to exceed” rate for your loan for a period of up to 12 months. The rate can also modify down if rates drop, so it is a win-win.
If you are interested in getting pre-qualified to help you determine what you can afford and help you get many of your questions about the process answered we would love to help!
To get started, complete the pre-qualification form online HERE. A member of our team will call you to setup an appointment.
Have questions now?
Call one of the individuals below:
Cindy Minchew, Business Development Specialist
Brittany Acree, Chief Retail Operations Officer