USDA- U.S. Department Of Agriculture
Zero Down Home Loan- Limited to Specific Areas
Has location requirements and income limits. In the Austin-Round Rock-San Marcos area, buyers with a 1-4 person household can’t make more than $88,350 annually, and 5-8 person households are limited to $116,600 (income limits are subject to adjustment by the USDA). Home has to be in a rural area and a property’s eligibility can be confirmed online at the USDA website. The buyer cannot own another property. Kyle and Buda markets are currently eligible for this type of loan. Buyer must have a minimum 640 credit score. Maximum allowable seller contributions are 6% of the purchase price. Loan has to meet complete underwriting approval and then its off to USDA for final approval -- timeline is approximately 45-60 days.
FHA - Federal Housing Association
3.5% Down payment Options
This loan has the highest mortgage insurance rate that does not cancel (.85% if loan-to-value is greater than 95%; 1.30% MI rate for a loan-to-value less than or equal to 95%). The mortgage insurance will not fall off of the loan any longer. The monthly mortgage insurance is for the whole life of the loan (normally 30 years) unless the loan-to-value is less than or equal to 90% at closing, in which case the MI cancels after 11 years. There is also a mandatory up-front mortgage insurance premium of 1.75% that must be paid at closing but can be financed into the loan. It typically offers much lower interest rates than conventional loans but remember the benefit of low rates can be mitigated by the high mortgage insurance rate. Maximum loan amount of $331,200. Minimum 620 credit score required (600-620 allowed with 5% down payment and compensating factors). Maximum allowable seller contributions are 6% of purchase price. Timeline to close is about 30-45 days.
VA-Veteran Affairs Home Loan
Zero Down
Only available for persons that have VA benefits (veteran or a non-remarried spouse of an eligible veteran who has either been listed as missing-in-action or has died due to service-connected injuries). VA loans do not require a minimum down payment or monthly mortgage insurance but instead require a funding fee of up to 3.3% of the loan amount (this fee may be financed into the loan). This loan typically offers a much lower interest rates than other loan products and is a great option if the buyer is qualified. It has specific fees that the buyer is not allowed to pay for (e.g. “unallowable fees”). Maximum loan amount of $417,000. Maximum allowable seller contributions are 4% of the purchase price. Minimum 640 credit score required (620-640 with compensating factors). There can be lender required repairs as well depending on the condition of the home. The appraisal process can take as much as two weeks -- 30-45 days to close.
Conventional Home Loan
With 3%-20% Down Payment Options
If you qualify for a FHA loan then it is a good idea to check if you qualify for a conventional home loan with a minimum 3% down payment. This will give you more buying power in today’s market and could save you money in the long run. There is still mortgage insurance if the buyer’s loan-to-value is less than 20% at closing, but it has a lower rate than FHA mortgage insurance and it will fall off once the buyer acquires 20% equity in the home. Maximum allowable seller contributions are 3% of purchase price if less than 10% down payment and 6% of purchase price if greater than 10% down payment. Minimum 660 credit score required (620 if the borrower puts at least 20% down). A conventional loan typically moves faster than other loan options with an average of 30-40 days to close.
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