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A VA loan is a government-backed mortgage option available to Veterans, service members and surviving spouses. VA loans are made by private lenders, like mortgage companies and banks, and not the Department of Veterans Affairs.
VA home loans offer competitive interest rates and terms and can be used to purchase a single-family home, condominium, multi-unit property, manufactured house or new construction.
- FICO® score at least 550 = 05% down payment.
- MIP (Mortgage Insurance Premium ) is not required.
- No Max Debt-to-Income Ratio.
- The home must be the borrower’s primary residence.
- Borrower must have steady income and proof of employment
Important FHA Guidelines for Borrowers
The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes in the United States and its territories. It is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934 when it was created.
- FICO® score at least 580 = 3.5% down payment.
- FICO® score between 500 and 579 = 10% down payment.
- MIP (Mortgage Insurance Premium ) is required.
- Debt-to-Income Ratio up to 56.9%.
- The home must be the borrower’s primary residence.
- Borrower must have steady income and proof of employment
An FHA Loan is a mortgage that’s insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers.
FHA loans are a good option for first-time homebuyers who may not have saved enough for a large down payment. Even borrowers who have suffered from bankruptcy or foreclosures may qualify for an FHA-backed mortgage.
A USDA home loan is a zero-down-payment mortgage for homebuyers in eligible towns and rural areas. USDA loans are guaranteed by the USDA Rural Development Guaranteed Housing Loan Program, a part of the U.S. Department of Agriculture. Most USDA loans are issued by partner lenders, though the department can grant them directly to qualified borrowers with incomes below a certain limit.
Types of USDA loans
There are three USDA home loan programs:
Loan guarantees: The USDA guarantees a mortgage issued by a participating local lender, allowing borrowers to qualify for low mortgage interest rates without a down payment. While borrowers don’t have to pay for PMI, they will have to pay an upfront fee of 1% and an annual fee of 0.35% of the loan balance, which is amortized across monthly payments. This typically costs less than traditional PMI.
Direct loans: Issued by the USDA, these mortgages are for low- and very low-income applicants who are without safe housing or can’t access a traditional home loan. Income thresholds vary by region. With subsidies, interest rates can be as low as 1%. These loans also offer terms of up to 38 years.
The USDA usually issues direct loans for homes with a market value below the area loan limit. Again, that’s a moving target depending on where you live. The limit can be $700,000 or more in pricey real estate markets like California and Hawaii, though most rural areas have loan limits closer to $330,000.
Home improvement loans and grants: These loans or outright financial awards permit homeowners to repair or upgrade their homes. Loans are capped at $40,000, while grants have a maximum of $10,000. Packages can also combine a loan and a grant, providing up to $50,000 in total assistance. Loan terms are for 20 years with a 1% interest rate. If the borrower sells the home within three years, they’ll have to repay any grant money.
Qualifying for a USDA-guaranteed mortgage
Income limits to qualify for a USDA-guaranteed home loan issued by a partner lender vary by location and household size. But the borrower’s household income cannot exceed 115% of the median income in the county where their new house is located. To find the income limit for the county where you live, consult this USDA map and table.
USDA-guaranteed home loans can fund only owner-occupied primary residences. Borrowers must also:
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Be a U.S. citizen or permanent resident.
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Have a proven history of dependable income.
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Have a credit history that demonstrates a reliable ability to repay debts, and a score of at least 640 to qualify for streamlined processing. Borrowers without credit history can be evaluated through alternative criteria.
The monthly payment on the loan — including principal, interest, insurance and taxes — must be 29% or less of the borrower’s monthly income. Other monthly debt payments cannot exceed 41% of the borrower’s income.
Qualifying for a Single Family Housing Direct Home Loan
The USDA also directly issues loans to certain low-income borrowers. To qualify for a Single Family Housing Direct Home Loan, borrowers must:
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Meet income limits, which are designated by county and metro area. Limits can be found here.
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Currently be without “decent, safe, and sanitary” housing.
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Be unable to meet the qualifications necessary to obtain another kind of mortgage.
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Be a U.S. citizen or eligible noncitizen.
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Taking the first step is easy, whatever your situation. If you are just starting to think about a loan, or are ready to start your loan now, The Veteran Lending Team's exceptional loan officers are ready to help you without obligation.
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You read that correctly! We issue fully verified, GUARANTEED, Pre-approvals. What does that mean? Well.... If we as the mortgage lender are unable to provide a final commitment letter that meets the terms of the Guaranteed Fully-Verified Pre-approval Letter we issue, we will pay both the buyer and the seller $1,000 each.
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