If you are one of the many persons that served in the army services, then you know at some point you will come back in the US, and you will want to find a new home. But the reality is that getting the best loan can be quite the hassle. So, you have to figure out what works for you and what doesn’t! With that in mind, it’s important to note that there are multiple options here, with the FHA financing and military loans being some of the best.
What should you know about FHA refinancing and military loans?
Both of these are backed by the government, and you don’t have to worry about charges and hidden fees or prepayment penalties. These are great loans especially if you want to get a new home for the first time. The FHA is a mortgage insurance program, but the VA program is considered mostly as a guarantee.
Even if the two things don’t seem to be very different, the reality is that there is indeed a difference that you have to keep in mind and it’s a rather noticeable one, to be honest. The focus here is that being backed by the government does provide you with some very interesting options and you are bound to like them quite a lot.
When it comes to down payments, you need to know that the FHA requires a 3.5% down payment for the borrowers that have a good credit score. This does mean you need to have at least 580 on your credit score. If you don’t, then the down payment will increase to around 10% or even more. You do need to keep in mind the fact that the FHA program does allow you to pay the closing costs with up to 6% of the purchase price, the VA only offers you 4%.
The reality is that insurance costs money as well. The FHA has a mortgage insurance premium that can be around 1.75% of the entire loan amount. There’s also an annual premium that has 0.85% of all borrowers. However, the funding fee for all the VA mortgages is around 2.4%, which is higher. Also, the VA will waive the funding fee for veterans that have a disability connected to their service. Even if the VA option seems more expensive, do remember that there is no insurance requirement here.
Income and debt
In the case of the FHA, you will see that they allow the house debts to be up to 31% of their total income. The VA approach, on the other hand, is to have a DTI ratio of 41%. So, each one of these is interesting; the approach is different.
Which one is the best?
For most people, the VA program tends to be easier to navigate and certainly a lot less costly than the FHA program. However, you have a down payment and want to save the eligibility for other purchase; the FHA financing will come in handy. Also, in case you have few debts, and you have a seller that wants to pay the closing costs, the FHA option is still a very good one. Study all these options, and you will be able to acquire some great results in no time!
Posted by Randy Blakeslee