USDA Loans in NJ: Have You Found a Home Loan Provider?
USDA Loan Info helps compare conventional loans to FHA to VA when looking to obtain a contract. It’s important to understand:
Which USDA Loan is the best one?
Which one’s right for you and do you need to be rural located?
Which rural based loan is best for me?
We want to help you figure out which one is going to benefit you and your family the most, for you a short-term and/or long-term goals because it’s different for everybody.
Now there are advantages to each one when entering a contract.
Out of these rural loans so some have lower interest rates, some have lower fees there’s all kinds of different things to think about when considering USDA Loans.
Navigating the Process in NJ
Now most people have a tendency to just look at one thing. The new payment!
Well, it’s understandable when you’re buying a house you say, hey which which payment is cheaper and who should I go into contract with?
But, again how long you gonna be in that new rural house? Is there PMI? Will the PMI rates disappear? When will it disappear?
If the PMI rates are to disappear in five years butI’m gonna be here in 20 years, maybe this other loan is better a long term depending on your eligibility!
So we have to look at these things as a whole in order to understand USDA Loans and their sub-categories in their different area.
Now people ask you all the time what’s today’s interest rate with this kind of contract and what’s up with the USDA Loan eligibility?
NJ and the PMI Approach
When we look at the whole situation you have to understand that all these items, represent different risks to the lender and the higher the risk the higher the interest rate!
The lower the risk for example if you put a lot more money down, obviously a lower risk right?
NJ FICO Scores and What it Means to Your Home Ownership:
Or if you have a higher FICO score lower risk, non-dependent on the area right?
Well we have to look at these things as a whole to help you determine what interest rate you’re gonna get and that also helps determine which program is right for you!
Okay now it’s time we’re gonna get into the nitty-gritty we’re gonna get into the comparison with each eligible area and their program.
Number one – new conventional program. A conventional has a minimum of a 620 FICO Score Credit score if you’re not sure what a FICO score is that is your mortgage credit score.
Now on an FHA some lenders go as low as a 500 my company goes down to a 550 the truth is nobody gets approved at 500 anyway and on a VA we’re also looking at the same thing many lenders go to 500 company goes to 550.
PMI insurance and on eligible FHA
The MIP insurance premium now on a conventional what happens is it is very very dependent on what is your credit score somebody with a very high score might have a very low insurance payment, but if you have a 620 FICO score your insurance payment could be way high.
Now on eligible individuals for FHA.
FHA program has pretty much standardized regardless of the area, here is your MIP rate.
Remember they’re the same thing they just call them something else here’s your MIP rate it doesn’t matter if you have a 620 a 580 a 550 or 800 FICO score makes no difference you’re gonna pay the same rate.
Okay we’re almost halfway through the pros .
A debt ratio is the percentage of your gross. Eligible Gross income is before they take taxes out. A percentage of your gross income to your debt.
Now on a conventional program with a high FICO score they’re gonna allow you or a 50% that includes your car payment your cards student alimony child support all those kind of things plus the new house payment, that should be no more than 50% now if you have a lower FICO score, it’s probably gonna be 45% that’s how conventional works.
Now let’ stake a look at eligible FHA with a 580 FICO score or above, here’s what’s basically going to happen. You’re gonna probably be approved to a 56. 99%let’s call it 57%, again that includes all your debts plus the house payment as a payment.
Lastly we have a VA program:
Now a VA works very very different it looks at how much money is left over after paying all this stuff.
And it’s called residual income and everybody depending on what area of the country you live in and how many people in your family there’s a certain formula for it.
Now if you have 20% more than that just to give you an example if it was a thousand dollars but you have 20% more $1200 and a high FICO score you may even go up to 60 or 65% debt ratio which is unbelievable and its highest in the whole industry.
Interest rate on a conventional program you’re often going to hear Fannie Mae, Freddie Mac those are conventional. On a conventional you are gonna have a higher interest rate than either FHA or VA.
On an FHA, it’s lower than conventional and right about the same as VA they have virtually the same interest rates.
Down payment on a conventional you’re usually looking at a 3% down payment. People ask me about a conventional Mae Freddie Mac yes those are conventional.
Now if we look at an FHA an FHA is gonna require a three and a half percent down payment as long as your FICO score is 580 or above.
If it’s 579 or below it requires a 10%down payment and of course for our veterans who honorably served, we thank you! You get a zero percent down payment.
Okay so we talked about PMI, MIP insurance whatever you want to call it. But there’s also something called upfront insurance.
Now on a conventional there is no up front insurance, but those of you with a high FICO score might want to pay some, and they eliminate the monthly PMI payments forever.
So that’s a big deal and that’s only available on a conventional and it doesn’t make sense unless you have a really good FICO score. On an FHA we take the amount and multiply it by 1. 75 percent we have to add that to the amount.
Simple example – if you have a hundred thousand dollar 1. 75 percent is $1,750, we’re gonna add that, so you’d actually be borrowing $101,750 upfront insurance.
On a VA there’s a couple of different scenarios here the first time use of a VA it’s 2. 15%so on that same hundred thousand dollars.
It’s two thousand one hundred and fifty dollars added on on a second time use it’s three point three percent so that’s three thousand three hundred dollars now it doesn’t sound like the end of the world.
If you’re taking a four hundred thousand dollar and it’s a second VA that’s three point three percent that is $13,200, that may make you say mmm this other might be better.
Now though lastly if you’re a veteran who happens to be disabled 10 percent or more there is no upfront fee that there is no VA mortgage funding fee it doesn’t exist for you.
Okay seasoning from bankruptcy many Americans through the last few years they’ve had a hard time and they did file a bankruptcy.
On a conventional 4 years must have elapsed from the discharge not from when you started but from when it was finished before you’re allowed to apply for a conventional.
On an FHA it’s only two years and on a VA it’s only two years. Short sale seasoning.
Well a lot of people ask what’s a short sale?
Well at a time when people owed more than the house was worth, they often went to the bank and said, hey my house is worth three hundred I owe four hundred and the bank accepted three hundred thousand dollars.
That was called a short sale. Well if you have a conventional if you want to apply for a conventional it would be four years after a short sale.
For an FHA it’s three years must have elapsed from the time of the short sale and for a VA it’s only two years. Again Vets win, they earned.
A foreclosure well yes some people went into really hard times on a conventional we are looking at seven years before you can buy a home againOn an FHA it’s only three years and For the vets – two years from a foreclosure.
On a conventional there is actually no real time frame but the lender will take a look they just want to make sure it’s reasonable and everything is considered as a make sense situation you can be back to work for one month after or six months or a year off.
On an FHA FHA guidelines require six months back to work with pay stubs proof they’ve been back to work for six months before they’ll accept that income.
On a VA it varies perl ender some lenders will accept right back to work some might want six months or three months a lot of them will require just get past the probationary period on the job and you’re good to go.
Occupancy on a conventional you can buy for a rental, you can buy for a second home if maybe you want to live in the mountains or down by the beach on the weekends or obviously for an owner-occupied property.
For a FHA and VA it is owner occupied.Good morningThis is Ellen Mitchel with REMAX Allstars This morning I am happy to have William Cabanfrom Cross Country Mortgage here People may not know but there are over 1 anda half million veterans currently living in the state of FloridaYet there are a lot of misconceptions regarding VA loans that both buyers and sellers haveSo I wanted to invite William here this morning to clear some of those up for usThank you so much for having me Ellen I really appreciate itMy name is Will Cabin with Cross Country Mortgage specifically with the TeamWe have offices throughout Florida New York New JerseyOur team specifically we specialize specifically with VA loansWe do it because of the fact that we feel that in the state of Florida there are somany veterans that are not served the way that they should beAnd unfortunately there are a lot of agents listing agents listing side buyer side whojust dont understand the product well enough And Im here to go over some of the myths thatare associated the common myths not all of them but just the most common myths that areassociated with va loans and kind of debunk some of those myths so we have an idea ofwhat the truth is versus what we hear in the marketRight So some of the most common myths are The appraisalstake forever in this market right To be honest with you in the state of Floridaits posted were one of the few states that actually have it posted on the va websiteWe are supposed to have the va appraisal back in 5 days okay and we can send the link toyou so we can show you that Second myth is borrowers are less qualifiedThis is what breaks my heart because on an average credit scores income your assets toclose and your overall education advanced degrees etc are higher from an average standpointthan your fhas your conventionals and your jumbos combinedSo that myth is just simply not true Most of the time our va clients are very wellqualified So that myth is completely debunkedAnd then we have sellers have to pay the closings costs rightBecause all the time sellers have to pay this they have to pay that they have to pay allthe fees They dontTheres not a single fee that sellers have to payOne fee that most people are misconcepting theres a misconception about paying is thepast inspection And actually the veteran can pay that in thestate of Florida Were one of the few states that can actuallymake the veteran pay for that Most of the time we dontWell take care of that So that myth is completely debunkedAnd then outside of that is fha and va are the same type of loanIts not Its completely different theyre both governmentloans but theyre completely different types of loansSo because of that theres misconceptions of well Im not gonna take it because it is anfha loan and its zero downpayment so its inferior The client doesnt have skin in the game whichhurts my heart when I hear that because the only way you get a veteran a va loan is bybeing a veteran active duty or service or putting your time in as they saySo thats the skin of the game That really is the skin of the gameAnd then the last one in this market is you cant finance condosAnd to be very very honest with you va loans have two components that are really greatThe first is if a condo is approved its approved more or less for lifeAnd there is only one document that we need to get in order to make that approved condofinancable and its insurance related So its not even related to the condo itselfits just an insurance document Outside of that we have about ten percentten times more condos approved in the va channel than we do through fha and conventional combinedTheres something I dont know maybe about five or six hundred condos that are approved versusthe six that are approved for fha So these are the most common myths that wecome across But by no means are they all mythsBut these are the most common that we see in the marketSo Im just glad to present that Im just glad to be here and talk about thatThank you so much Well youre certainly you know clearing upa lot of things for me A lot of conceptions that I had had over timebut were obviously wrong So I look forward to having further conversationabout that OkayIf you liked this video and found it useful please below go ahead and like it also leaveany comments Will will be happy to send you a list of thefive or six hundred condos that are available that are va approvedAbsolutely As well as the five common misconceptionsand the truth about those misconceptions the myth busters if you willSo please go ahead and like us below and we will doing a follow up seriesAny questions that you put below we will answer them for you and we will cover them in futurevideos Thank you so much and have a great dayThank you.