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Purchase Loan Information

Home Purchase Loans:

What purchase loan is best for your situation?

You options for a home mortgage are VA Loans, FHA Loans or Conventional Loans. Click on the loan type name for some pro’s and con’s of each type of loan.

VA Loans

VA loans allow 0% down payment with rates that are typically lower than Conventional or FHA loans.

VA loans allow the home Seller to pay not only up to 6% of your closing costs, but also your funding fee (if paid in total) and also some of your debts, if needed to qualify. No other loan program except VA allows the Seller to pay that much.

VA loans have something called an up-front “Funding Fee” that can be as high as 3.3% of the loan amount (unless you are considered disabled by the military, then it will be waived) It can be paid by adding to the loan amount, having the home’s Seller pay it (if paid in total) or paid by the Veteran directly.

FHA Loans

FHA loans allow as little as 3.5% down payment (it could be as little as $1,000 down payment required, with our CHFA FHA loan) which is lower than a Conventional loan.

FHA loans typically have lower rates than Conventional loans.

FHA loans have more lenient rules for credit, income, assets and employment evaluation. This allows some borrowers to qualify that wouldn’t be able to with a Conventional loan.

FHA loans have up to 1.75% of the loan amount in up-front Mortgage Insurance, which is added to the loan amount, but it also has a Monthly Mortgage Insurance payment as high as 1.25% which is added to your payment. 

FHA allows the borrower to request the removal of the monthly Mortgage Insurance payment, but only when they have paid down the loan to 78% of the original homes value or after they have paid it for a minimum of 5 years (whichever is longer).

Conventional Loans

Conventional Loans have many more loan and rate options than FHA or VA loans.

The down payment requirement for Conventional Loans has been lowered to 3% from 5% making Conventional Loans an even more attractive option for Homebuyers.

Conventional loans with down payments less than 20% down require Mortgage Insurance, however, the Mortgage Insurance is significantly lower than FHA loans and don’t require any up-front Mortgage Insurance premiums. Mortgage Insurance is auto matically dropped once you have reached 78% loan to value or you can provide documentation (appraisal) that you have at least 20% equity in your property unlike FHA loans. It’s worthy to note that because AAFCU is a Credit Union, our borrowers get lower rates than most Banks or Brokers can offer.

Conventional loans sometimes require borrowers to show some savings (called "reserves") in addition to their down payment. The amount of savings/reserves typical needs to equal at least 2 months of payments. This requirement ensures that if a financial problem was encountered, that there would be sufficient savings to still make their payments for at least 2 months until the problem is no longer an issue.