Government Loans

In today’s economic climate, approved loans are harder to come by.  A saving grace in times like these are the tried and true Government loans which include FHA, VA, and USDA loans.

These loans allow borrowers to purchase with little or no down payment.  They loosen the credit guidelines that Conventional loans are limited by.  And they make owning a home possible for those who never thought it would be.

We at Island Home Loans are proud to offer these Government loans with the knowledge and experience to guide you through the process.

FHA Loans (Federal Housing Administration)

FHA loans allow a borrower to purchase a home with a minimum down payment of 3.50%.  A typical Conventional loan would require at least 10%, but preferably 20%. 

FHA loans allow a blemished credit history.  You may qualify for an FHA loan even though you have had financial problems.  You can obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you’ve maintained good credit since your debts were discharged.  If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you two to three years from the final date of your foreclosure.

Mortgage insurance is funded into the loan, meaning a premium of 1.75% is added to the loan balance instead of being paid out-of-pocket. In addition, a percentage of 1.35% of the loan amount is added to your monthly payment in the form of mortgage insurance.   

VA Loans (Veteran’s Administration)

VA loans are a small way to say thank you to those who have bravely served our country.  Our veterans can get 100% financing to purchase a home.

Like the FHA loan, a VA loan is also beneficial to borrowers who have struggled with their credit.  Your Mortgage Planner will be able to tell you whether or not your specific credit history is sufficient to qualify.

The VA loan has a Financing Fee which is charged by VA.  This fee amount is dependent on your type of service and can be financed in the purchase loan amount.  One true benefit to the VA loan is that there is no mortgage insurance.  The one time Financing Fee covers the risk involved when lending 100% of a purchase price.

Lenders are a bit more strict as far as property condition on a VA loan.  The VA needs to make sure that their Vets are getting homes that are in good shape and that won’t cause them problems in the future.  Due to this, VA will not allow any part of the property structures to be unpermitted or any major repairs to be necessary.  As of October 2010, the VA has stopped allowing financing on homes with water catchment systems.  So any Veterans looking to purchase a home needs to look in areas that have County water supply.

There is also a VA IRRRL loan (Interest Rate Reduction Refinance Loan) for those Vets who would like to refinance an existing VA loan.  It is a much cheaper way to lower your interest rate than a typical Conventional mortgage.  And there is no appraisal or income verification required.

 

USDA/RH Loans (United States Department of Agriculture/Rural Housing)

USDA loans are available for individuals who would like to purchase in zones considered as “rural”.  Luckily for those of us who live on the Big Island, all but Hilo proper is considered “rural”.

USDA will finance up to 102% of the purchase price to account for the 2.00% up front fee.  There is a small monthly mortgage insurance fee, which is considerably less than conventional mortgage insurance.

There are income limits and stricter income-to-debt ratios required by this program.  Please check with your Mortgage Planner to determine whether or not you fall into the USDA/RH guidelines.  If so, this product is truly a great one.