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What Mortgage is the Best Fit for My Family
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Wednesday, June 14, 2017

Have you been looking at homes for sale in the Cincinnati or Northern Kentucky area and just aren’t sure what type of mortgage will work best for your family? It can be challenging as you seek to find the perfect deal on a mortgage. The best idea is to find a mortgage that will meet you where you need to be based on your credit score and down payment. You should be equipped to make an educated choice on what loan will work best to help you finance the house that you will make your home, without incurring unnecessary fees or becoming ‘house poor.’
A Conventional Loan is still your best bet when you’re shopping for a mortgage. This type of mortgage is not insured or guaranteed by any government agency, so there are no additional insurance premiums and it will usually have a locked in rate. The main challenge for some families is that a Conventional Loan requires a 5%-10% down payment and a credit score ranging between 660-700 and above depending on which company is servicing the mortgage.

If your credit score is a bit lower than the desired range you may need to consider an FHA loan. FHA loans are helpful for people with high debt-to-income ratios and/or lower credit scores. Even with a score of 580 or lower you may be able to obtain an FHA loan. You’re also only required to make a 3.5% down payment on the home. While this may seem enticing, keep in mind that this loan is insured by the federal government. Owners of an FHA mortgage will have 2 premiums to pay. The first insurance premium is 1.75% due at closing. The second would be an annual premium that continues the duration of the loan. The only way to rid yourself of that annual premium would be to refinance the loan. Taking an FHA loan may get a mortgage on your dream home, but financially may cost you more in the long run, especially if it creates further strain on your debt-to –income ratio.

If you’ve served in the military, another viable home loan option is for a VA loan. VA loans can be appealing because there is a zero down payment requirement on the loan. Veterans also do not have to pay additional insurance premiums like what the borrower of an FHA loan faces. They do however, have a mandatory funding fee. Another benefit is that a borrower can also have a higher debt to income ratio than allowed on a conventional loan. The VA doesn’t allow for additional charges that are typically rolled into closing costs. For that reason, when you purchase a home with a VA loan, the seller may roll that expense into the price and you’d pay higher for the home than with a conventional loan. A VA borrower can also be hindered because they’re unable to increase the amount borrowed in order to make improvements on the home.

Ultimately the choice is up to you on what works best for financing your future home. Weigh all of your options wisely and remember when you’re hunting prices on the Cincinnati MLS that if you can meet the requirements for a Conventional Loan, it’s probably within your best interest financially to choose that route. If you need further assistance or have questions, please contact Debbie Long Homes at 513-675-8844 where we help people and homes find each other.


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