Are you ready to buy a home? Congratulations! The Lake Region Bank home loan team is here to help you understand your financing options. Here are three of the most common types of home loans that may be available for you. It’s never too early to speak with one of our home loan experts about your options.
Conventional Mortgage Loans
A conventional mortgage loan is probably what comes to mind when you think of a mortgage. Conventional mortgage loans can be used to purchase your first home, second home, or investment property. The most popular option for borrowers is a 30-year, fixed-rate loan. Sellers can contribute to the closing costs of a conventional mortgage loan.
To qualify for a conventional mortgage loan, borrowers generally have to have a credit score of 620 or higher. A down payment as low as 3 percent is allowed, and borrowers who cannot contribute 20% down must purchase private mortgage insurance (PMI) for their loan. During the application process, your Lake Region loan officer will ask you to verify your income, assets, and employment status and history to help determine if a conventional mortgage is the right choice for you.
FHA Home Loans
If you are a first-time homebuyer, an FHA loan may be a good option for you. This home loan is backed by the Federal Housing Administration. You can choose between a 15-year or 30-year fixed-rate FHA home loan. Sellers can contribute to the closing costs of an FHA loan.
FHA loans have lower credit score and down payment requirements than conventional mortgage loans do. Because of this, all borrowers are required to purchase PMI. We can work with a credit score as low as 580 for this program. An FHA loan can be used to purchase your first home as long as you live on the property. The FHA limits the total amount you can borrow with an FHA loan. In Kandiyohi County in 2022, these limits were $420,680 for a single-family home and $538,650 for a two-family home. The FHA allows for higher debt-to-income ratios. That means you may be able to qualify for a more expensive house with this option.
VA Home Loans
If you are a veteran or active-duty member of the US military, you are eligible for a VA home loan. These loans offer low interest rates and flexible terms. If you qualify, you do not need to purchase mortgage insurance on your loan, and closing costs are capped. You can apply for a VA home loan multiple times throughout your life to finance a primary residence.
There is no minimum down payment and our credit score requirement for a VA home loan is 580. However, you do need to provide your lender with a Certificate of Eligibility (COE) from the US Department of Veterans Affairs to prove your eligibility. Sellers can contribute to the closing costs of a VA loan.
Rural Development Loans
USDA rural development loans are available to borrowers who are purchasing a home in rural areas, typically in communities of 20,000 residents or fewer. Lake Region Bank offers the USDA’s single family housing guaranteed loan, which provides 100 percent financing to eligible borrowers.
To be eligible, you need to meet income requirements and plan to live in the home you are purchasing. For a couple in Kandiyohi County in 2022, the income limit is $107,800. You may be eligible if you don’t have any credit score. If you have a score, it must be 580 or higher. These are just four of the different types of home loans that may be available to you. Finance your next home purchase with a home loan from Lake Region Bank. Our friendly, knowledgeable team looks forward to help you understand your lending options. Reach out to Lake Region Bank today.