An FHA loan is a mortgage backed by the Federal Housing Administration and provided by an FHA approved lender such as First Option. This type of loan is a great option for first time homebuyers who are more likely to have trouble coming up with a substantial down payment. You can get a Minnesota FHA loan with as little as 3.5% down and can secure a competitive interest rate on a 30-year fixed loan term.
Though they are willing to offer these types of loans to people with less stringent credit requirements, there are some limits to this type of loan. There is a loan limit cap depending on the area you live in. For example, if you are looking to purchase in Minneapolis, a single-family home cannot exceed a sales price of $365,000. Also, these loans require that you pay mortgage insurance throughout the life of the loan if you put less than 22% down. This can add up to thousands of dollars over the life of the loan.
A conventional mortgage will offer much more variety than an FHA loan. These can be offered as a variable rate mortgage, which may include an initial lower introduction interest rate for five, seven, or ten years before switching to a variable rate loan. There is also no cap on the loan limit, and if you put 20% down on your home (or once you achieve 20% equity), you may be able to drop the mortgage insurance payment.
Credit standards on a conventional loan will be slightly more stringent than an FHA loan, and you may be required to pay a higher down payment in order to qualify. Conventional loans can be a great option for people who may be looking to stay in the home for a shorter period of time, are looking in a higher price range, or are looking at more non-conventional style housing that may not otherwise qualify under the FHA housing guidelines.
VA loans are available to veterans who served on active duty and have had an honorable discharge after a minimum of 90 days wartime or 181 continuous days peacetime service. You must apply through the veterans administration to get approval for a VA loan. Once approved, you can find a local VA home loan specialist like First Option Mortgage to apply for financing with. Like FHA loans, the standards needed to qualify are more lenient than conventional loans. This type of loan can be offered at 100% financing and is available to veterans with a credit score of 620 and above.
This is not ideal if you are looking for a place in the heart of the city, but if you would like to find something further out and you are on a limited income, a Minnesota USDA loan is a great option for you. The name may seem somewhat deceiving, but a USDA loan is available in more rural areas outside of the large cities. There are many communities in Minnesota that meet the USDA guidelines as a rural community. This loan is designed for low to very low income earners, requires nothing down, and has less restrictive credit requirements.
If you are currently looking for a Minnesota mortgage lender to discuss obtaining a home loan, give First Option Mortgage a call. One of our experienced mortgage professionals would love to sit down and discuss your needs. Simply fill out our Fast Response form or give us a call in our local branch office in Edina at (952) 278-9900. We look forward to hearing from you!