Most buyers stay focused on finding the right home and often fail to learn the ins and outs of securing proper financing. by leaving those details up to their lender contact. Let’s look at some types of loans so you can better understand how much money you really need to put down when buying a house in Klamath Falls
- Conventional Loan
Starting with the most basic as implied by its name, the conventional loan is what most people think of when discussing mortgages.
They often have relatively higher credit score requirements, starting at 620, as well as a bare minimum 3% down payment, but these requirements can vary from lender to lender.
Like with most home loans, if your down payment is lower than 20% of the closing price of the home, your lender will be taking out Private Mortgage Insurance, or PMI. The purpose of this insurance is to shield the lender from losses in the event you default on the loan.
As the mortgagor of the property, PMI does absolutely nothing for you other than add to your monthly payments until you hit that magical 20% loan-to-value ratio.
- FHA Loan
At first glance, the FHA loan may seem very similar to a conventional loan, but there are a few key differences.
The FHA loan is a mortgage that is insured by the federal government, specifically the Federal Housing Administration. Due to this increased loan security, the qualifications for FHA loans when buying a house in Klamath Falls are lower, requiring a minimum credit score of 500 along with a 10% down payment.
A way that separates the FHA loan from others is how the minimum down payment scales alongside your credit score. Simply put: The higher your credit score, the lower your minimum down payment.
Taking a step up to the next tier from our previous example would require a credit score of 580, and then allow a buyer to make a minimum down payment of 3.5%. The downside to an FHA loan is that the FHA mortgage insurance premiums are passed on to you as the owner as well as a 1.75% initial fee.
- VA Loan
A VA loan is a loan provided through the United States Department of Veterans Affairs for qualifying former and active-duty military personnel.
This may seem incredibly simple on the surface, but it is absolutely essential that you contact your local VA office to ensure you qualify for a VA loan prior to getting in deep with a lender. The reason for this caution is that the predatory lending market has been targeting military members for years, and you don’t want to find yourself their next victim.
That said, VA loans are a dream with their potential 100% financing (meaning no down payment at all), no PMI ever, and reduced interest rates. On the downside, there is an initial startup fee, but this can be deferred and applied to your monthly payments.
We strongly encourage those that qualify to take full advantage of their VA loan when buying a house in Klamath Falls.
- USDA Loan
Created as part of the New Deal legislation in 1937, the USDA loan originated to assist rural communities and farm owners.
Today the focus of USDA loans is to sustain and sometimes encourage growth within these rural communities. With this focus on a specific sort of American life, it should come as no surprise that USDA loans are very limited by geography.
Purchasing a home in a qualifying area is the first big step, whereas no down payment and around 640 credit score requirements are certainly on the lower side. Like the FHA loan, there are fees both upfront and annually, but the annual fee cannot exceed 0.5% of the unpaid principal remaining on the loan.
- Help Exploring Lending Options When Buying a House in Klamath County
If you’re looking for help examining your lending options and down payment requirements when buying a house in Klamath Falls, contact us today at 541-884-1343!