Deciding On A Mortgage Loan Option That Is Right For You
Most homes are financed by mortgages issued by certified lending institutions that make a profit charging interest on the loan. Depending on your credit rating, the current market interest rate and how long you take to repay your mortgage, your interest rate will fluctuate.
If you’re trying to obtain a mortgage to finance your home, but are continuously being denied by lenders because your income is limited, your down payment is too small or you have a poor credit rating, this article can help. Keep reading for 3 tips you can use to improve your chances of finding financing for your home.
1. Investigate an FHA home loan.
In an effort to create equal opportunity for affordable housing, the Federal Housing Administration (FHA) offers mortgage insurance to qualified buyers. The loan still comes from a private lender, but because it’s insured by the FHA, the credit and down payment requirements are lessened.
With an FHA home loan, you can qualify for a mortgage with a 3% down payment and a less-than-perfect credit rating. You can even negotiate for a better interest rate.
However, the FHA has maximum limits on home prices that depend on the house’s region and county. Before you make an offer on a home, look into the FHA’s maximum limits in your area.
2. Investigate veterans’ or employer options.
The U.S. Department of Veterans Affairs offers home loan guarantees to qualified veterans that allow former servicemen to obtain a mortgage with no down payment and no mortgage insurance requirements.
Some large-scale employers offer similar programs to employees or retirees. Before you give up on home ownership, look into your union and company benefits.
3. Tap the resources in your retirement savings.
Most 401K and retirement savings plans allow you to withdraw the funds to use for a down payment on a home. However, you’re required to repay the funds within a certain time period.
For example, if you withdraw $10,000 from your 401K to make a down payment on a home, you’ll have 5 years to put that money back into your plan.
If you don’t want to remove funds from a retirement plan, you can still use them as your qualifying savings.
Banks and lenders like to see that you have at least 3-6 months of savings in case you lose your job or face financial hardship. You can use your retirement investments toward this qualification amount without having to withdraw them from the retirement plan.