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MSHDA First-Time Home Buyer Assistance Programs

If you’re a first-time home buyer, getting enough money for a down payment can seem like a major hurdle. But there’s good news! The Michigan State Housing Development Authority (MSHDA) has a program that helps home buyers afford their down payment by loaning them up to $10,000 towards it.

This is what you need to know.

kitchenWhat Is MSHDA?

The Michigan State Housing Development Authority “provides financial and technical assistance through public and private partnerships to create and preserve safe and decent affordable housing, engage in community economic development activities, develop vibrant cities, towns, and villages, and address homeless issues.” Part of its mission is to make owning a home in Michigan an affordable and realistic goal for as many people as possible. In addition to buying a home, it also offers programs for improving existing properties and dealing with foreclosure.

What Assistance Does MSHDA Offer First-Time Home Buyers?

The MI Home Loan and MI Home Loan Flex programs help first-time buyers with their downpayment. In addition to homebuyer education classes, these MSHDA products provide loans of up to $7,500 statewide. In many areas throughout the state, this amount can be increased to $10,000. (See this ZIP code list or state map to see which areas qualify for larger MI Home Loan amounts.)

Who Qualifies for First-Time MSHDA Home Buyer Assistance?

If this is your first time buying a home, you should look into the MI Home Loan and MI Home Loan Flex programs. To qualify, you must meet the following requirements:

Additionally, only homes that are priced $224,500 or less are eligible for assistance with downpayment.

Is MI Home Loan Only for First-Time Home Buyers?

No – MI Home Flex is available to all home buyers that meet its criteria. And in certain targeted areas, MI Home Loan is available to both new and repeat home buyers.

Should First-Time Home Buyers Choose MSHDA’s MI Home or MI Home Flex?

That depends on your financial and personal circumstances. MI Home Flex is a little more flexible and only requires one adult to apply (i.e. one partner out of a couple). Consult with a loan professional for more details – they will help you determine which best meets your needs.

As Michigan’s top MSHDA lender, Michigan Mortgage is ready to help you understand what Michigan loan programs are right for you. We’ve helped many first-time home buyers navigate MSHDA’s Mi Home and MI Home Flex programs, and we can help you find answers to all your home-buying questions.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

The Klyn Family

Success Story: The Klyn Family

At Michigan Mortgage, we strive to make life-long connections with our clients.

We commit to educating and advising long after the loan is closed and hope to reconnect with each family we serve at our annual customer appreciation events.

The Klyn FamilyThe Klyn family is no different. Loan Officer Amy Hendrickson and her team look forward to working with them every time they call.

“Amy treats you in such a way that you feel valued and want to be one of her clients for life,” David Klyn said. “We know that we are in good hands with Amy, and she is going to help us navigate through what can be a stressful time. Her thoroughness and attention to detail helps to calm our nerves and reduce stress.”

The Klyn family called Amy for the first time in 2019. Earlier this year, they purchased a new home via Michigan Mortgage and the Pro Snap app. They asked questions about another possible purchase and Amy answered all of them even though they opted against the transaction.

“Amy and her team are on top of responding to emails/phone calls and answering all of our questions,” David said. “I typically have a number of questions and Amy is always more than willing to answer these questions no matter how simple or dumb they are.  She is also willing to go over multiple scenarios based on different buying and selling options.”

This is one of the many reasons the Klyn family put their trust in Michigan Mortgage.

What do they like most about working with Amy and her team?

“Two reasons come to mind,” David said. “She is upfront and honest in everything she does.”

“Number two. Amy and her team have great service, treat you like family, and cover all the details.”

Our team is here to guide you every step of the way! And we appreciate the Klyn family for putting their trust in us each and every time they’re interested in making a real estate transaction.

Image of a family hanging up an American flag

Military Vets: Get a VA Home Loan

In addition to being one of the country’s leading lenders to first-time home buyers, Michigan Mortgage specializes in helping veterans of the United States military and their families get into their dream homes.

Veterans Affairs (VA) mortgages make it easier for veterans to obtain financing for home ownership. VA loans are available to veterans and active military members. VA loans are guaranteed by the Department of Veterans Affairs and are somewhat easier to qualify for than conventional mortgages.

Image of a family hanging up an American flagVA Home Loan Benefits

VA loans are great because:

  • They can be obtained without any down payment.
  • Mortgage insurance is not required even if you put less than 20% down.
  • The VA does not require a specific credit score for a VA loan.

Although the costs of getting a VA loan are generally lower than they are for other types of low-down-payment mortgages, VA loans do carry a one-time funding fee that varies depending on the down payment and the type of veteran.

According to the VA, veterans who have taken advantage of the program have some of the lowest home ownership default rates, and that the agency also helped 80,000 VA borrowers avoid foreclosure in 2014, saving taxpayers $2.8 billion.

VA Loan Requirements

VA loans are offered to most active duty, reserve or National Guard and veteran service members and even some surviving spouses.

Veterans are able to borrow over $400,000 without any down payment on a principal residence home. According to the VA, almost 90% of VA loans have no down payment.

There’s also no minimum credit score requirement for a VA loan, while most home mortgage loans require a credit score of at least 620 for conventional loans or 580 for most FHA loans. A VA loan can also be used to refinance an existing loan.

VA loans do have specific requirements that most other loans don’t. For instance, all work on the home must be completed before the inspection. Also, there can’t be chipped or peeling paint inside or out, or termites or mold or loose handrails. In other areas, a VA inspection can be a bit more stringent. For example, while most home inspectors merely turn on the home’s furnace to see if it works, the VA requires inspectors to verify that the heat source can keep pipes from freezing.

Are you a vet? Reach out to one of our experienced Loan Officers to learn more. 

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

Thomas Siuda

Success Story: Thomas Siuda

Change is hard – change following a national pandemic is even harder.

Thomas and his children set out to purchase a new home earlier this year following his divorce. COVID-19 and low interest rates made it more difficult than expected.

Inventory was extremely low and offers faced unprecedented competition, but Dave Lehner and his team at Michigan Mortgage were ready to help guide Thomas as soon as he found the right home.

“I made offers on four homes during my search,” Thomas said. “I missed out on each one, but that was in no way a reflection of Dave and his team. In each of these offers I made, I had estimates of what my closing costs and monthly payments would be.”

Thomas SiudaAfter four rejected offers, an offer was accepted, and Dave and his team went to work.

“The purchase itself was very simple due to the expert advice and team that I was working with,” Thomas said. “I had no hiccups along the way.”

“Right from the start, Jill was great to work with and set the tone for the entire process,” he said. “Everyone that I came in contact with from Dave’s team was friendly, easy to work with and was truly happy that my three kids and I found a home that we love.”

“Everyone from Dave to Jill to the entire team was welcoming, helpful and made my experience truly seamless.  It was simple and easy to follow what I needed to do and when.”

With the help of Pro Snap, most of the work was done via cell phone. Thomas applied via the app, securely scanned and uploaded the necessary documents and communicated with Team Lehner whenever needed.

“I enjoyed the whole experience from beginning to end,” Thomas said. “I was actually a little sad when I closed. I knew I would miss the communication with the team at Michigan Mortgage, but I did receive congratulations from everyone on our home.”

Thank you for trusting us to guide you home, Thomas! We enjoyed working with you.

Spring Welcome Mat

Tips for Buying a Home This Spring

The spring homebuying season is upon us! It’s the most popular time to buy a home, but also the most competitive. What do you need to do to be ready for it?

Given the financial commitment that buying a home represents, it’s amazing how many people wade into the process with minimal preparation. Here are six steps to get you ready to tackle the busy spring market and put you in position to get a good deal on a great home.

#1: Check your credit

Yes, you may be tired of hearing it, but checking your credit is the first step you want to take in buying a home. Even if you’re confident that you’ve got excellent credit, undiscovered errors in your report could drag down your score – and result in a higher interest rate on a mortgage. Your credit score will also affect the mortgage rate you can obtain and the cost of the loan as a result.

You’re entitled to a free copy of your credit report once a year from each of the three major credit reporting companies – Equifax, Experian and Transunion. You can order them through the official site at www.annualcreditreport.com. Once you have them, check for any errors in the payment history or status of your credit accounts and follow the instructions for correcting any that you find.

Your free credit reports don’t include your credit scores, which are what lenders use when evaluating you for a mortgage. For those you typically need to pay, either by purchasing them directly from the three companies or by enrolling in a credit monitoring service that includes your credit scores as a free perk.

Spring Welcome Mat#2: Know what you can afford

This can be a deceptively complex problem – it’s not simply a matter of figuring out how much of a mortgage payment you can handle. You also need to take into account property taxes, homeowner’s insurance and – you’re making less than a 20 percent down payment – mortgage insurance as well. All these are typically billed with your mortgage statement.

Then you also have to consider what kind of down payment you can make, the ongoing costs of home maintenance, monthly utility bills and a reserve for unexpected repairs. You’ll probably also want to have something set aside for buying new furniture or appliances, and other purchases/expenses to make the home your own.

The standard rule of thumb is that lenders don’t want to see you spending more than 28 percent of your gross monthly income on your mortgage payment, and no more than 36 percent on loans of all types (auto, credit cards, etc.) though these are flexible. Just as important though, is how much of your earnings you want to spend on housing – 28 percent may be higher than you want to go.

#3: Consider the down payment

Your down payment isn’t just a matter of what you can put together or trying to hit a certain number. To a certain extent, the size of a down payment is a choice you make depending on how much you’re looking to borrow and the mortgage terms you’re willing to accept.

While a 20 percent down payment is considered the gold standard, it isn’t mandatory. Most lenders view 10 percent down nearly as favorably and many will let you go as low as 5. That allows you to buy a higher-priced home, but you will need to buy private mortgage insurance, which is like paying an extra half a percent or more on your mortgage rate.

If you go the FHA route, you can put as little as 3.5 percent down, which maximizes your homebuying ability but means higher fees both up front and for annual mortgage insurance.

If you’re seeking a jumbo loan or have damaged credit, lenders may require that you put at least 30 percent down in order to be approved.

#4: Do Your Research

Browse the real estate listings to see what sort of homes are being offered in your price range and where. Drive by a few of them to get a sense of the home and neighborhood in real life. Go to a few open houses to get a sense of the market and a feeling for prices. Pay particular note to homes that sell almost immediately after being listed – that’s a sign it was attractively priced, while ones that linger are likely overpriced.

You can also check local assessor’s office records online to see what other homes in the area have sold for recently, or use commercial online listings to do the same thing.

#5: Use a Realtor

A Realtor representing your interests as a buyer can be a big help when house hunting. First, they’ll be tuned into the local housing market and can help you cut through the clutter to find the properties that best match your criteria. They can also alert you when new ones are coming on the market.

#6: Be Ready to Buy

Because the spring housing market can be very competitive, you want to be ready to make an offer as soon as you find the right house. If you wait a day or two to think it over, you may find someone else has beat you to it, particularly if it’s an attractive property.

For this reason, you want to be sure to get preapproved for a mortgage before you being home shopping in earnest. Getting preapproved means choosing a lender and submitting all the financial information you need to be approved for a loan. It’s different from being prequalified, which simply means a lender gives you an estimate of what you can borrow based on unverified information you provide.

When you’re preapproved, you can show that to a seller as evidence you’re ready to buy and have the means to do so. That’s an important thing to be able to do when you may be competing with several other offers.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

First Time Buyer FAQ

First-Time Buyer FAQ

For first-time buyers, the mortgage process raises a lot of questions. In this article, we tackle some of the most common questions we receive from customers.

“How Does a Mortgage Work?”

First Time Buyer FAQTechnically speaking, “A mortgage is a debt instrument secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.” (Investopedia.com)

What does that mean in plain English? It means, when you get a mortgage, you are (1) borrowing money from a lender and (2) committing yourself to paying back the money you borrowed in equal monthly payments for the length of the loan.

Because a house can be expensive, mortgage payments are usually spread over 15 or 30 years, making the cost affordable.

Your mortgage payment will consist of principal and interest portions. The principal portion goes toward reducing the amount of money you originally borrowed. The interest portion goes toward paying off the interest, which you can think of as the fee the lender charges to loan you money.

You can make additional payments, if you want, but at the least you need to make your minimum monthly payment each month.

“What Types of Loans Are There?”

Mortgage lenders offer a wide variety of loans designed to meet the needs of buyers. The most common types of loans obtained by first-time buyers are:

  • Conventional loans. This is the most common type of mortgage loan. Conventional loans can be for as long as 30 years or as short as five years, with options in between. They can be fixed-rate or adjustable rate. Conventional loans are provided by banks as well as private mortgage lenders like Mortgage 1. When most people think about home loans, the conventional loan is the one they are thinking of.
  • FHA loans. A Federal Housing Administration (FHA) loan is a mortgage that is insured by the Federal Housing Administration (FHA) and issued by an FHA-approved lender such as Mortgage 1. FHA loans are designed for low-to-moderate-income borrowers; they require a lower minimum down payment and lower credit scores than many conventional loans.
  • VA loans. VA loans are offered through the Department of Veterans Affairs. They are available to active and veteran service personnel and their families. VA loans are backed by the federal government and issued through private lenders like Mortgage 1. VA loans have favorable terms, such as no down payment, no mortgage insurance, no prepayment penalties and limited closing costs.
  • USDA loans. Rural Development home loans are low-interest, fixed-rate loans provided by the United State Department of Agriculture. The loans do not require a down payment. The loans are financed by the USDA and obtained through private lenders, such as Mortgage 1, and are meant to promote and support home ownership in underserved areas.
  • MSHDA loans. The Michigan State Housing Development Authority (MSHDA) offers down payment assistance to people with no monthly payments. The down payment program offers assistance up to $7,500 (or 4% of the purchase price, whichever is less).

“How Do I Qualify for a Mortgage?”

Different mortgage types have different specific qualification requirements, but the general process of qualifying for a mortgage is the same.

  1. You submit an application with a lender.
  2. You provide the necessary documentation, which includes paycheck stubs, tax statements, bank and asset statements, and identification.
  3. The lender reviews your information. They look at your income, how much debt you have, and they also pull a credit report.
  4. Based upon your status, the lender determines how much money you can afford for a mortgage as well as what interest rate you should receive.

“What Is the Required Minimum Credit Score?”

An important element of qualifying for a mortgage is your credit score. Your lender pulls a credit report to look at your credit score. Different loan types have different qualifying scores:

  • The minimum qualification score for most conventional loans is 620.
  • For FHA loans, the minimum score is 580.
  • For VA loans, the minimum score is 620.
  • For USDA loans, the minimum score is 640.

In addition to credit score, a lender looks at your debt-to-income ratio to make sure you are not overextended.

How Much House Can I Afford?”

To determine how much house you can afford, follow the 28/36 rule.

Many financial advisers agree that households should spend no more than 28 percent of their gross combined monthly income on housing expenses and no more than 36 percent on total debt. Total debt includes housing as well as things like student loans, car expenses, and credit card payments.

The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay each month.

To calculate how much 28 percent of your income is:

  • Multiply 28 by your monthly income. If your monthly income is $7,000, then multiply that by 28. 7,000 x 28 = 196,000.
  • Divide that total by 100. For example, 196,000 ÷ 100 = 1,960.

Do the same for the 36 percent rule, using 36 in place of 28 in the example above.

Got Questions? We’ve Got Answers

Come back next week for part two of this article. In the meantime, if you have questions, let us know. At Michigan Mortgage, we specialize in helping first-time buyers understand the mortgage process.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

Buying a Vacation Home

Tips for Buying a Vacation Home

August is the traditional vacation month for many Americans.

In Michigan, vacationers go “up north” for relaxation and fun. Some own waterfront cottages or cabins in the woods. Others may spend time at a lakeside rental.

For those who do not own a place, the experience of getting away for a week or two inspires dreams of buying a vacation home.

If you fall into this category, this article is for you. We’ve assembled tips for buying the vacation home of your dreams.

These guidelines apply whether you want a place on the Great Lakes in Michigan, near Put-in-Bay in Ohio, on Florida’s Gulf Coast, in California’s Napa Valley, or on the outer banks of Texas.

Buying a Vacation HomeThe Benefits of Owning a Vacation Home

We’ve already alluded to one of the benefits of owning a vacation home: having a place to call your own.

There are other benefits, too.

  • If you vacation often, you could save money in the long run. Vacation rentals during peak seasons like summer or the winter ski season can get expensive. They might equal or exceed the cost of annual mortgage payments on a place you own outright.
  • You could generate income by renting out your vacation home.
  • Your vacation home may appreciate in value over time, providing you with an investment that builds wealth.
  • There could be tax advantages to owning a vacation home. (Consult your tax advisor.)
  • You have a place to potentially retire to.
  • You have a place you can go to anytime, year-round, to relax and get away.
  • You have a place to entertain family and friends and start new traditions.

The Realities of Owning a Vacation Home

As with most things in life, owning a vacation home does have its flip side. None of these are insurmountable, but you should be aware that when you own a vacation home:

  • Depending on the location, vacation homes can be expensive to buy. A condo or small cabin in woods is within many people’s reach, but waterfront property on a sandy beach might not be.
  • You will be paying a mortgage, property tax, insurance, utilities, and maintenance expenses for two homes.
  • Real estate isn’t as liquid an asset like stock or bonds. While real estate generally appreciates over time, there are occasions where prices drop. If you need to sell during a market or economic downturn, you may have to take a reduced price.
  • In some places, you may not be able to rent your property. Or, there are restrictions on how often and how long you can rent.

Buying a Vacation Home

Financing a vacation home is different than financing your primary home. How so?

  • If you already have a primary home mortgage, the vacation property mortgage will be considered a “second home” mortgage.
  • Second home mortgages sit between primary home mortgages and investment property mortgages.
  • Second home mortgages are a bit tougher to qualify for. Lenders often want larger down payments. And the interest rate may be higher. Why? The reason is, a vacation home represents a larger risk to the lender. If a homeowner is having trouble making the payments on their vacation home vs. their primary home, most owners will make their primary mortgage payments. This puts the second home at greater risk. Lenders want larger down payments to ensure borrowers have more skin in the game.
  • If you have a primary home mortgage, your income needs to be high enough to justify both the primary and secondary mortgage payments.

Vacation Home vs. Investment Property

One thing in your favor when it comes to financing a vacation property home is, if you plan to use the property as a true second home, it’s less expensive than if you plan to use it as an investment property.

Tips for Buying a Vacation Home

Here are tips for getting your dream vacation home:

  • Be familiar with the area in which you want to purchase.
  • Find a local real estate agent in the area.
  • Start saving now. Down payments on vacation homes can be as much as 30% higher than on primary residences.
  • Go with a lender you can trust. For a vacation home, while you should use a local real estate agent, you can use whichever lender you are comfortable with.
  • Get pre-approved.

Are you considering a vacation home? Do you have questions? Give us a call at 231-799-2606.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

The Benefits of Working with a Local Mortgage Lender

Buying a home might be the single biggest purchase you make in your life. You want it to go right. That is why the mortgage lender you choose is critical to making sure your homeownership dreams come true and the experience is hassle-free.

Whether you are a first-time buyer needing assistance through the lending process or you are an existing homeowner seeking to refinance or purchase a vacation home, it pays to go with a local lender as opposed to a big-name national bank or brand.

Here’s how a local mortgage lender can help guide you home.

1. Personalized Service

A local mortgage lender gives you the chance to to work face-to-face with an expert, if need be. The growth of digital mortgages, like our Home Snap app, has eliminated the need for as much face-to-face meeting in the past, but as a home buyer it can be reassuring to know that your loan officer is right around the corner as opposed to across the country or overseas.

A local lender gets to know you. Your messages won’t sit in a voicemail box unanswered for weeks on end. With Michigan Mortgage, you’ll get a cell number for your loan officer and can call or text them at a moment’s notice to get your questions answered.

Local Loan Officers have an incentive to provide you with excellent service because they want you to be a source of referrals for future business. Our loan officers know that whether you have a great experience or a bad one, your friends and relatives are going to hear about it. Our loan officers live and work in your neighborhood. They want the best for you and the community. They have a vested interest in having each and every loan close as smoothly and efficiently as possible.

2. Local Expertise

Another advantage of local lenders is their familiarity with local market conditions. Local lenders know their local neighborhoods, so they know what’s going, what the trends are, and they use that knowledge when helping buyers obtain mortgages.

For example, a national lender with no roots in the local community may be reluctant to approve a mortgage for an atypical property, such as an original farmhouse on acreage that’s now covered by a subdivision. A local lender will know the history of the area and the changing demographics and economic trends and may be more comfortable underwriting such a loan.

Local lenders also have their finger on the pulse of the local or regional economy, and have a better sense of the lending risks in the area. What looks to a big lender like a dilapidated section of town might actually be an up-and-coming area where properties re increasing in value. Local lenders will know this.

Local lenders may also be more attractive to some home sellers and real estate agents who want an efficient and timely closing. Reputation matters. In situations where several offers are on the table, having a local, trusted lender could be the difference between closing or not closing.

3. Realtor Relationships

Local lenders invest a lot of time and effort building relationships with local Realtors. Realtors and lenders are the yin and yang of real estate. Michigan Mortgage Loan Officers are on a first-name basis with most of the real estate agents in their local areas.

Many local loan officers have extended hours, allowing borrowers and Realtors to contact them during the evenings and weekends. If you see a house you love on a weekend, chance are you can reach your loan officer and get an approval quickly.

Also, with everyone on your team – the Realtor, the lender, you– working in proximity, a closing can happen quickly and without hassle. The final stage of home buying is sometimes the most stressful. Having a unified team that is familiar and comfortable with each other can make the process quick and painless.

4. Varied and Specialized Products

Local lenders have a better understanding of property values and the local economy. When you work with Michigan Mortgage, you’re paired with a licensed loan officer and team of professionals who are experts in your region. Our loan officers help you choose the right type of loan for your circumstance and we keep you updated along the way. We have in-house tools and resources to expedite a loan, ensuring everything is taken care of in a timely manner.

Local lenders are where you’ll find the specialized loans the big lenders won’t bother with. Maybe you want an adjustable-rate mortgage with a 15-year lock? Or you want to buy a vacation property that lacks a furnace? Or you want to buy or refinance a home for less than $100,000, an amount too small to be of interest most lenders? Or you want a jumbo loan?

Local lenders are have more flexibility. Big banks need process large numbers of loan applications. To do that, they have rigid guidelines about who they will and won’t lend to. Big banks are more about volume than customer service.

At Michigan Mortgage, we have been Michigan’s leading MSHDA first-time buyer lender for 7 straight years. We are also a recognized USDA rural development leader.

5. Reliable, Responsive & Flexible

Local lenders are better at closing loans on a timely basis. If the closing of a loan has to be extended by a week, local lenders are more flexible than big banks who have corporate mandates to crank out the volume.

Local lenders, along with local real estate agents, have an incentive to provide you with excellent service because they want you to be a referral source for future business. They stake their reputation on each and every customer.

With a local lenders, you are much closer to the decision makers with the authority to approve your mortgage. You aren’t dealing with a corporate bureaucracy.

Local loan officers are more likely to get personally involved in qualifying you for a mortgage, as opposed to big banks.  Often, it’s a matter of the getting to know you. Perhaps you are self-employed with irregular income. Or you have poor credit due to a financial crisis, but have good income and low debt.

Michigan Mortgage Loan Officers are better suited to be responsible and flexible for borrowers like these.

At Michigan Mortgage, you will never be just a name or number on a loan application. We manage every step of the mortgage process, from application to underwriting to closing, to make the process easy. We have been financing the American homeownership dream for nearly 25 years. We can do the same for you.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

Buying a Home with Zero Down

What is a “Zero-Down” Loan?

A zero-down home loan is a no-down-payment mortgage offered by the United States Department of Agriculture (USDA) for eligible rural and suburban home buyers.

You might be thinking, “but I don’t live in a rural area.” That’s OK. While the purpose of the USDA loan program is to boost home ownership in rural areas, the USDA’s definition of “rural” is wide ranging and includes many villages, small towns, suburbs and exurbs of major U.S. cities.

These loans are issued through the USDA Rural Development Guaranteed Housing Loan Program. USDA loans have been available since 2007. They are generally intended for low- or moderate-income borrowers.

What Are the Benefits of a USDA Loan?

USDA loans offer many benefits over traditional mortgage loans.

  • $0 down payment. This is the obvious benefit.
  • Competitive interest rates. USDA loans typically offer some of the lowest interest rates on the market. Interest rates on USDA loans are determined by several contributing factors, however the primary factor is your credit profile, as is the case with all mortgage options. Those with higher credit scores often receive the most competitive rates, although borrowers with less than stellar credit may still qualify for a low rate due to the USDA guarantee.
  • Low monthly mortgage insurance
  • Lenient requirements. USDA loans are designed to provide homebuyers with lenient eligibility requirements that help low-to-moderate income purchasers obtain a home.

USDA Loan Eligibility

At a minimum, USDA loan program guidelines require:

  • U.S. citizenship or permanent residency
  • Ability to prove creditworthiness, typically with a credit score of at least 640
  • Stable and dependable income
  • A willingness to repay the mortgage, as indicated by at least 12 months of no late payments or collections
  • Adjusted household income is equal to or less than 115% of the area median income. See here for income guidelines.

A credit score of 640 or above usually helps eligible borrowers secure the best rates for a guaranteed USDA loan with zero down payment. Such a score also rewards you with a streamlined or automated application process.

You can still qualify for a USDA loan if your credit score falls below the margin or if you have no credit history at all. However, the interest rates may not be as favorable. In addition, applicants with no traditional credit history may still qualify for these loans. However, you’ll need to show a reliable financial standing through evidence like timely utility or tuition payments.

How Do I Apply?

Applying for a USDA loan is pretty straightforward.

The first step is to choose a USDA lender, such as Michigan Mortgage. We specialize in USDA loans. Once you are working with us, we’ll find out what home you are interested in, where it’s located, your asset and debt situation, and how much you need to borrow. We will conduct a credit check to assess your credit score, just as we do with a traditional mortgage.

Once all that is done, we’ll ask you to provide documentation, including:

  • Government-issued ID
  • W-2 statements
  • Recent pay stubs
  • Bank statements

The application process is pretty easy, really. Our loan officers are skilled at making everything go smoothly and helping you navigate the process and get you in your home as soon as possible.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1. 

Image showing a graph being analyzed

Conventional, FHA or VA: Which Loan is Right for You?

When it comes to getting a home loan, there are a number of options available to U.S. home buyers, but there are three programs that seem to be the most requested.

  • Conventional
  • FHA
  • VA

What are the differences in these loan types, and which is right for you? We’ve got the answers.

No matter which loan type you are considering, get started fast with Home Snap.

Image showing a graph being analyzedConventional Loan

Conventional loans are the most popular mortgage loan in the US. Conventional loans make up nearly three quarters of all home loans in the country. At Mortgage 1, this percentage holds true, also, according to Mortgage 1 CEO Mark Workens. Michigan Mortgage is a DBA of Mortgage 1.

What is a conventional loan?

A conventional loan is a mortgage that is not insured or guaranteed by the government. Instead, the loan is backed by private lenders. With a conventional loan, insurance, if there is any, is paid by the borrower.

Why do so many home buyers go with a conventional loan?

One reason is flexibility. Conventional loans can be obtained for a variety of lengths and for a wide range of terms. Provided you put down at least 20 perfecnt, conventional loans don’t require any mortgage insurance. And conventional loans can be used for second homes or vacation properties.

Here’s a summary of conventional loan pros and cons and who they are best suited for.

Pros of conventional loans:
  • Low interest rates
  • Fast loan processing
  • Variety of down payment options, starting as low as 3% of the home’s sale price
  • Various term lengths, ranging from 10 to 30 years
  • Reduced private mortgage insurance (PMI), if needed
Cons of conventional loans:
  • Require good credit score
  • Require 20% down payment to avoid insurance
  • More stringent eligibility requirements
Conventional loans are good if:
  • You have a good or excellent credit score and can qualify for a low interest rate.
  • You’re purchasing a second home or a vacation home.
  • You’re purchasing a property you plan to fix up and flip or rent.
  • You will make a 20 percent down payment and won’t need PMI.
  • You want a shorter loan term or flexible terms, (e.g., a variable-rate mortgage).

FHA Loan

An FHA loan is issued by a federally approved bank or financial institution that is insured by the Federal Housing Administration. The FHA is the largest mortgage insurer in the world. It has insured more than 47.5 million properties since 1934.

With an FHA loan, the FHA isn’t lending you the money. Instead, the FHA insures the loan, which means if you fail to make payments and the house is foreclosed, the FHA absorbs the cost.

Pros of FHA loans:
  • Minimized credit qualifications
  • Reduced down payment requirements
  • Lower closing costs
Cons of FHA loans:
  • 75 percent upfront mortgage insurance premium required at closing, regardless of down payment amount
  • Monthly mortgage insurance payments for the life of the FHA loan if the down payment is less than 10 percent. It can be canceled after 11 years if the down payment is 10 percent or more.
  • Limited to owner-occupied properties
  • Loan limits are lower than those of conventional mortgages
FHA loans are good if:
  • People whose house payments will be a big chunk of take-home pay.
  • You have a lower credit score.
  • You will be making a smaller down payment
  • The purchase price meets FHA mortgage limits

VA Loan

A VA loan is a mortgage loan that’s issued by private lenders and backed by the U.S. Department of Veterans Affairs. It helps U.S. veterans, active duty service members, and widowed military spouses buy a home. To qualify for a VA loan, you must meet one of the following criteria:

  • Be an active duty service member or an honorably discharged veteran who has 90 consecutive days of active service during wartime or 181 days of active service during peacetime.
  • Have served more than six years in the National Guard or the Selected Reserve.
  • Are the spouse of a service member who died in the line of duty.
Pros of VA loans:
  • No down payment
  • No minimum credit score requirement
  • No limit to the amount you can borrow
  • No PMI insurance requirements
  • Don’t need to be a first-time home buyer
Cons of VA loans:
  • Must be military member or veteran
  • Required to pay a VA loan funding fee between 1.25% and 3.3% of the loan amount
  • Can only be used for primary residences
VA loans are good if:
  • You or your spouse are military service members or veterans
  • You don’t have money for a down payment.
  • Your credit score is fair or poor
  • You plan to occupy the home

If you have questions about a loan program listed above, please reach out. We’re here to help in any way we can.

This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.