Sources Of Financing

Banks, Trust Companies And Credit Unions:
Banks, trust companies and credit unions are traditional sources of home mortgages and if you have a good relationship with them and can get a good interest rate then there is no reason not to deal with them. However, they tend to be rather inflexible in negotiating fees and usually only offer limited mortgage programs.

Finance Companies:
Finance companies operate much like banks when offering mortgages. The main difference is that they will loan money to people with a poorer credit rating, but charge a higher interest rate to compensate for the greater risk they take.

Mortgage Brokers:
Mortgage brokers are in the business of arranging mortgages and have access to many sources of money. While they charge a fee if you shop around you can obtain the services of one of them for a reasonable amount and the money spend might be more than offset by savings obtained if they obtain a mortgage at a lower interest rate than you could get on your own. If your credit rating is less than perfect or you need an unusual type of mortgage then they can often find a mortgage source for you.

Private Individuals:
Some individuals have sufficient funds available that they can offer one or two individuals a mortgage. The problem is finding them. A mortgage broker may know one or two of these individuals or you may find one of them through a relative or an acquaintance.

FHA Mortgages:
The Federal Housing Administration (FHA) is a government program to assist Americans in improving existing housing standards and conditions. The FHA doesn’t actually lend you the money, rather they guarantee the lender that the loan will be repaid. FHA mortages tend to be more forgiving than convential mortgages in regards to your credit history and they usually require no more than five percent as a downpayment.

To qualify you must have a history of paying off debts in a timely manner, the mortgage payment must be less than 29 percent of your monthly income and the total mortgage payment and other long term debt (car loans, credit card balances etc.) cannot exceed 41 percent of your monthly income.

VA Loans:
If you have served in the armed forces and are buying a house for personal use you may be eligible for a VA loan. The VA doesn’t issue the loan itself; rather it issues a certificate of eligibility so that you can apply for a VA loan from a mortgage lender. The lender is protected against loss should you fail to repay the loan. This guarantee means the lender takes on less risk and therefore can offer loans at a reasonable rate with low down payments. To get a VA mortgage you must go to a mortgage lender and meet the VA income and credit standards, if the lender is unwilling to give you the mortgage you have no recourse but to try another mortgage lender.

Rural Housing Service (RHS) Loans:
If a property is located in an eligible rural area and you are a low to very low family you may qualify for assistance.

There is a Guaranteed Loan program available to low- to moderate-income rural residents. In this program the RHS guarantees loans made by private sector lenders, so that should the individual borrower default on the loan, RHS will pay the private financier for the loan. You need no down payment, but must show that you can afford the payments. Also you must be without adequate housing, have been unable to obtain a loan elsewhere, and have acceptable credit.

There is also a Direct Loan program for those with low or very low incomes. This program offers direct financial assistance from the Rural Housing Service in the form of home loans at affordable interest rates. You need no down payment, but must show that you afford the payments. Also you must be without adequate housing, have been unable to obtain a loan elsewhere, and have acceptable credit.