ANAHEIM, Calif., June 7, 2016 /PRNewswire/ -- With a wide mix of mortgage products to meet the needs of a variety of borrowers, mortgage lenders are able to make buying a home possible for many consumers – despite media headlines about low inventories, rising prices and continued tight credit.
To be sure, there have been plenty of headlines about these issues. Home prices rose 5.2 percent during the 12 months ending in March, according to the latest S&P/Case-Shiller Home Price Index, released May 31, and credit availability declined in May, according to the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association.
Inventory is also tight. Consider this from Zillow's April market report:
- There are 3.4 percent fewer homes for sale in the U.S. than a year ago.
- There are 7.8 percent fewer entry-level homes for sale in the U.S. than a year ago.
It's a good-news, bad-news scenario for consumers. Sellers are enjoying higher prices, while buyers may find affordability declining and availability scarce. Still, even for concerned buyers, the economy has been able to support higher home prices with solid job growth and low mortgage rates. And, even though credit is tight, several lenders offer new low down payment options, down payment assistance programs and government products designed to provide borrowers with additional borrowing options.
Interest rates continue to hover below 4 percent — and near historical lows — on 15-year and 30-year fixed-rate mortgages, allowing move-up and first-time homebuyers to afford a larger mortgage than they could with higher interest rates in play.
Look for a lender that offers several loan products
Savvy borrowers will want to seek out a lender that offers a variety of loan products to explore all their options, and pick a loan product that works best for their situation. For example, maybe they're seeking a loan that offers a low down payment, or one geared toward someone with excellent credit.
Here's a quick look at some of the most common home mortgage loan types:
- A conventional loan. Also called a conforming loan, a conventional loan isn't guaranteed by the federal government and generally carries fewer restrictions than a government-backed loan. They are typically the choice of borrowers with good to excellent credit.
- An FHA loan. The Federal Housing Administration insures this type of loan, which is provided through private lenders. It allows for a low down payment of just 3.5 percent, low down payment options and more flexible credit qualifications than a conventional loan. FHA loans are popular with first-time homebuyers. FHA loans have mortgage insurance associated with the loan. FHA credit score requirements are lower than that of a conventional loan. Homebuyers only need a credit score of 580 to qualify for a 3.5% down payment.
- A VA loan. The U.S. Department of Veteran's Affairs loan program helps active-duty military, veterans and eligible surviving spouses become homeowners. A VA loan doesn't require a down payment, and the VA allows sellers to pay closing costs. The VA doesn't have a minimum credit score requirement but rather requires the lender to review the entire loan profile in making a decision whether to approve a VA loan.
- A USDA loan. The U.S. Department of Agriculture has home loan products for rural Americans that are based on an individual's or household's income and they don't require a down payment. A USDA loan requires a minimum credit score of 640. USDA loans have an annual fee associated with the loan.
- A jumbo loan. A jumbo mortgage is essentially a loan with a larger amount than the conforming loan limits established by regulation. The jumbo loan limit is a loan that exceeds $417,000 in most of the United States, but conforming loan limits can reach $625,500 in high-cost areas. A jumbo loan in those counties exceeds the increase amount. Jumbos are riskier for lenders and, as a result, typically carry a higher interest rate than a conforming loan and may require a larger down payment. Minimum credit score requirements will vary by lender, property type and loan size.
There simply isn't a one-size-fits-all mortgage product, although some products are designed to reach broad categories of consumers, while others serve a more narrow niche. Each loan product has features that may be better tailored to one particular borrower vs. another, so seek out a lender that offers multiple loan products and that will take the time to explain the pros and cons of each. Then shop for your new home with the confidence that you are well-informed about your financing options.
Carrington Mortgage Services, LLC's Mortgage Lending Division (www.CarringtonHomeLoans.com) is an affiliate of The Carrington Companies, which owns and operates multiple businesses that cover virtually every aspect of single family residential real estate transactions through investments in U.S. real estate and international mortgage markets, loan origination and servicing, asset management and property preservation, real estate brokerage, title and escrow services. To read more visit: www.carringtonhc.com.
Office: (469) 344-4465
Mobile: (214) 533-6741
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SOURCE Carrington Mortgage Services, LLC