FHA and VA Loans – The Basics
If you are in the market for a new home, chances are you’ve
heard the terms FHA and VA loans mentioned before, but do you
really understand them? FHA, Federal Housing Administration, and
VA, Veterans Administration, are two governmental agencies that
negotiate with banks and lenders to enable many first time
homebuyers and people with low to moderate incomes to purchase a
home. Many people who apply for FHA and VA Loans do not have the
resources or credit rating needed to qualify for a traditional
home loan. FHA and VA loans are insured incase the borrower
defaults on the loan. This makes them much less of a risk and
provides protection to the lending agency.
FHA Loans
FHA loans are popular among recent college graduates because
they don’t require a large down payment. People, who have
improved a past credit rating score or repaired past credit
problems, are also a good candidate for a FHA loan. In order to
qualify for a FHA loan, you must meet certain guidelines and
requirements. The home you intend to purchase with your loan
must be considered your primary or main residence. Your total
monthly debt cannot exceed 41% of your gross monthly income.
Your mortgage payment can consist of up to 29% of your total
monthly debt amount. The amount of your FHA loan cannot exceed
the maximum allowed for your area. To determine the maximum
mortgage amount allowed in your area, you should contact a
qualified lending agency to assist you.
VA Loans
VA loans are available to qualified veterans. In order to
determine your eligibility, the VA will take into consideration
the duration of your service and whether you served in time of
war or peace. You will also need to have an honorable discharge
in order to be considered. If you qualify for this type of loan,
the VA will send you a certificate of eligibility. This
certificate is then presented to the agency in which you wish to
obtain your loan. VA loans also require your total monthly debt
to be under 41% of your gross monthly income. The Veterans
Administration sets a limit on the amount you can borrow. Unlike
the FHA loan, this amount generally does not vary among
different locations. VA loans can be obtained without any
closing costs or down payment from the buyer.Our top recommended FHA & VA mortgage lenders are:
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