FIRST TIME HOME BUYER PART THREE: The "alphabet soup" of loans.

If you have check on mortgages at all you probably have seen the "alphabet soup" of loans, FHA, VA, RD, MSHDA. Most people are familiar with "conventional" loans. These loans are typically for people with a good credit score and 20% down payment. (Not all conventional loans require 20%.) Many people have heard of FHA and VA loans but aren't really sure what they are. Some people are familiar with RD or MSHDA. I will try to give you a little information on each of these but please remember I am not a lender. Please consult with your lender to determine the best loan for you!!

Often people are ready to buy a house but haven't had a chance to save 20% of the purchase price. The "alphabet soup" loans can help with that. They are government-backed loans that allow a buyer to purchase with a lower down payment amount. The requirements vary with the actual loan. For instance, VA loans are designed for current and former members of the military. RD loans are designed for home purchases outside of metropolitan areas. FHA loans are available for almost anyone. They tend to require a much lower down payment (as little as 3.5%). MSHDA loan can contribute up to $7500 toward down payment and closing cost. Keep in mind that not all lenders provide all of these loan options.

The type of loan you choose can impact the house you can buy. A conventional loan can be used for almost any inhabitable home. The government-backed loans are a little (to a lot) more selective on the homes that qualify. For instance, if a roof shows too much wear the house won't qualify. Other things that disqualify a home from government-backed loans can be peeling paint in a home built prior to 1978 or no handrails on stairways. Another issue can be that these loans can take a little longer to process. If a seller is looking at multiple offers, they may go with a buyer getting a conventional loan. With that being said, these programs are great because they allow buyers to be homeowners a lot more quickly than they might otherwise be. The houses tend to not need major repairs right away which can be a big relief.

Hopefully this information has provided a brief overview of loan options. As I mentioned above, consult with your lender to see what option might be the best fit for your new home purchase. Don't forget to enjoy the experience!!