What Loans are Available?
There are several kinds of loans that you can get for your home. The most popular kinds include:
- Conventional loans
- Federal Housing Administration (FHA) loans
- U.S. Department of Veterans Affairs (VA) loans
Conventional loans are among the most common and popular loans in Las Vegas. Conventional loans are usually fixed-rate mortgages, meaning the interest you pay for your loan does not change throughout the loan’s lifetime. Conventional loans are fixed-rate loans. Although conventional loans are desirable, they are also the most challenging to qualify.
Conventional loans in Las Vegas generally require a larger down payment than other loans. You also need a higher credit score for a conventional loan and a lower debt-to-income ratio. Private mortgage insurance (PMI) may also be a requirement for your loan, depending on the loan’s down payment requirements. Although it can be challenging to qualify for a conventional home loan, doing so usually means that you end up with a loan that is less expensive than a loan backed by the federal government. Conventional loans typically fall into two categories which are conforming and non-conforming loans.
Conforming loans abide by specific guidelines, such as guidelines set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises. Fannie and Freddie, along with other lenders, often buy and bundle conventional loans and then sell them on the secondary market as securities. Even though they are sold on the secondary market, conventional loans must still abide by the same guidelines as conforming loans. Be aware that certain limits apply to conventional conforming loans. In 2022, the maximum loan amount available was $647,200, although that amount can rise slightly in higher-cost areas. If a loan is taken out above this amount, it is considered a jumbo loan, which usually has a higher interest rate. Jumbo loans are riskier than regular ones, making them less appealing on the secondary market.
With a non-conforming loan, the lending institution that underwrites the loan, usually a portfolio lender, creates its guidelines. Non-conforming loans are not available on the secondary market. A mortgage lender can help answer any questions about the different kinds of loans.
Federal Housing Administration (FHA) loans are controlled by the U.S. Department of Housing and Urban Development (HUD). This entity provides many loan programs that American homeowners can participate in. FHA home loans in Las Vegas are usually easier to qualify for than conventional loans. They also require a lower down payment since they’re backed by the government rather than a private lender. Many first-time homeowners prefer to get FHA loans because their credit score requirements are less strict than the requirements for conventional loans. While the minimum down payment for home loans in Las Vegas is typically 20%, you can get a down payment as low as 3.5% for an FHA loan. While the lower upfront cost of the loan is appealing, along with the fact that you don’t need to pay as much in interest, be aware that you may need to pay more in premium mortgage insurance with this kind of loan.
U.S. Department of Veterans Affairs (VA) loans are administered by the Department of Veterans Affairs (VA). Although the VA does not create loans, it guarantees mortgages made through qualified lenders. The guarantee from lenders allows veterans to purchase homes at a price that is more affordable to them. VA loans generally have favorable terms for loan recipients, including that a down payment is not necessarily required. It is usually easier to get a VA loan than a conventional loan. Lenders typically cap the maximum VA loan limit to the same amount as a conventional mortgage loan limit. Before applying for a VA loan, you’ll need to ensure you are eligible to get the loan. To make that determination, you can contact the VA to determine your eligibility. If the VA accepts an application, the homeowner receives a certificate of eligibility that can be used to apply for a VA loan. Along with VA loans, veterans may have other assistance options, including those administered by state and local governments.
Equity and Income Requirements
To apply for a loan, you’ll need to show proof of employment or self-employment, income, and credit score. You may also need to show that you have cash reserves, which you can tap into for emergencies or to pay closing costs.
One of the reasons that experts recommend shopping around for mortgages is that mortgage lenders in Las Vegas can offer different prices on their mortgages. They often base their pricing on a loan recipient’s perceived risk, which is the likelihood that they will default on their loan. Therefore, when you apply for a loan, a lender will want to see proof of income. A lender will also want to evaluate your creditworthiness and look at your FICO score, which can be provided by the three major credit bureaus. Along with looking at your FICO score, a lender will also consider your loan-to-value ratio and debt-service coverage ratio. The debt-service coverage ratio is the amount a lender is willing to pay for a loan and the corresponding interest rate. The loan-to-value ratio is the amount of equity available in the collateral that you are borrowing against. If you are buying a home, you can find the LTV by dividing the loan amount by the home’s purchase price. Lenders usually assume that the more money you spend on a down payment, the less likely you will default on your loans in Las Vegas. If the LTV is high, you’re more likely to default in the eyes of a lender, which means that the lender will charge more.
Fixed-Rate and Floating-Rate Mortgages
Fixed-rate and floating-rate mortgages are options to choose from when you’re getting a loan. A mortgage lender can explain the difference between the two to help you better understand which one works best. If you get a fixed-rate mortgage, the interest rate stays the same while you have the loan, which makes it easier to predict monthly payments. With a floating-rate mortgage, the interest rate may be lower initially, but it can change after the introductory period. You may end up spending more in interest with a floating-rate mortgage in the long run, but you can also end up with a favorable interest rate depending on the market conditions.
To find out more about what kind of mortgage is right for you, or if you are wondering, “where can If find a loan officer near me?”, contact us today for assistance and support.