Cache Valley Mortgage: You Don’t Need 20% Down To Get A Conventional Loan

There are a lot of misconceptions about the mortgage industry right now (Thank you media!) and one of the big ones is that you need 20% down to get a Conventional Loan. This is very far from the truth. Yes you need to have good credit and decent job history but you don’t need 20% down.

It’s true. If you have a credit score of at least 700 you can get a Conventional mortgage in Cache Valley, Utah. If you have a 720 or 740 credit score than you will command a cheaper interest rate but there are still some benefits to getting a Conventional mortgage vs. an FHA loan.

Conventional Loan vs. FHA

FHA is a good loan program for those that only have 3.5% down, need a gift for the down payment, need a non-occupied co-signer, or have credit scores less than 700. However for everybody else, I believe that a Conventional loan will be the better option in most cases. Here’s why…

  • Conventional loans don’t require upfront mortgage insurance
  • Conventional loans have cheaper annual mortgage insurance
  • Conventional offers more lenient property guidelines

Regarding mortgage insurance, Conventional also offers an option to borrowers that want to pay for it all upfront. It’s called “single premium mortgage insurance” and it can save people thousands on their mortgage payments.

Don’t get me wrong. I love the FHA and Rural Housing mortgage programs and they are a big part of my businesss and there are times when somebody with great credit still needs an FHA.

For example, I recently had a borrower with an 800 credit score  and a 20% down payment that had to go with an FHA loan because their debt to income ratio was too high for Conventional. It wasn’t that they couldn’t afford the mortgage payments but they had a lot of self-employed income that couldn’t be used on the loan appllication.

However in most cases if your credit score is over 700 and you have at least a 5% down payment than you will likely save money on your monthly payments by using a Conventional loan.

Conclusion

I know of some people that have missed out on an opportunity to purchase a home or refinance because they had a misconcepti0n about the loan programs that are available. If you have any questions about a particular loan program or if you might qualify, give me a call at 435-770-2709.

Cache Valley Mortgage: Rural Housing Boundaries for Cache Valley, Utah

Cache Valley Mortgage: The USDA Rural Housing Mortgage

The USDA Rural Housing mortgage plays a huge role in the Cache Valley real estate market, party because there are so many areas that qualify, but also because it is an excellent loan program with some big advantages for home buyers. See…Rural Housing Map for Cache Valley, Utah.

First, let’s talk about some of the advantages. The biggest advantage is the fact that Rural Housing does not require an annual mortgage insurance premium like other programs such as FHA and conventional. This is a huge advantage because it means that your monthly payments will be much lower than that of FHA or conventional (assuming same loan amount and a down payment less than 20%).

Another big advantage to USDA is that it doesn’t require a down payment unlike FHA which requires a minimum down payment of 3.5% and conventional which requires at least 5% down.

These are two advantages that FHA doesn’t have. It begs the question…”Is FHA or USDA Rural Housing the better loan?” Let’s look at the biggest disadvantage of the Rural Housing loan.

One Big Disadvantage: The biggest disadvantage of USDA is the upfront cost which is much higher than FHA or Conventional. USDA requires an upfront funding fee of 3.5%. It can be financed into the loan but this means that you are starting your home ownership experience underwater by 3.5%.

I have done the math and it turns out that if you are planning on staying in the home for longer than 2 years it makes more sense to use the USDA loan vs. FHA or Conventional. And in all reality, if you aren’t planning on staying in a home for more than 2 years, you probably shouldn’t be buying a home.

There are dozens of cities in Cache Valley that qualify for the USDA home loan. Some of those cities are…

  • Smithfield
  • Most of Hyde Park
  • Amalga
  • Mendon
  • Nibley
  • Parts of Millville
  • Hyrum
  • Wellsville
  • Paradise
  • Richmond
  • Trenton

There is a Rural Housing map where you can see the general area that does and does not qualify or you can go to the Rural Housing website and type in an address to type in a specific address to see if it qualifies.

As always, feel free to give me a call at 435-770-2709 if you have any questions about the USDA Rural Housing home loan, or any other mortgage program for that matter.

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