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5 Mortgage Loans You Didn't Know About

December 28th, 2016 5:08 AM by Jackie A. Graves

Owning a home is part of the American dream. In order to purchase a home, a buyer must either use cash or take out a loan. If it’s the latter, those loans come with either a fixed or adjustable rate, and they are typically for 15 or 30 years. Most potential homebuyers assume that these are the only options available to them, but that’s not the case. It’s possible that one of the lesser-known mortgage loans listed below will apply to your situation.

FHA 203(k) Loan

There are two types of FHA 203(k) loans: regular and streamlined. This type of loan is perfect for a homebuyer looking to purchase a home that’s in need of repairs, upgrades or perhaps even reconstruction. If it’s the latter, use a Regular 203(k) loan. If it’s the former, then consider a Streamlined 203(k) loan. With a Streamlined 203(k) loan, your home improvements do not require plans, consultants, engineers and/or architects. (For more, see: An Introduction to the FHA 203(k) Loan.)

You can use a 203(k) loan for the following:

  • Structural alterations and reconstruction
  • Modernization and improvements to the home's function
  • Elimination of health and safety hazards
  • Changes that improve appearance and eliminate obsolescence
  • Major landscape work and site improvements
  • Reconditioning or replacing plumbing; installing a well and/or septic system
  • Adding or replacing roofing, gutters and downspouts
  • Adding or replacing floors and/or floor treatments
  • Enhancing accessibility for a disabled person
  • Making energy conservation improvements

A traditional home improvement loan might come with high interest rates, short repayment terms, and a balloon payment. A 203(k) loan offers a long-term fixed or adjustable-rate loan. (For more, see Insuring Federal Housing Authority (FHA) Mortgages.)

Rural Development Loan

The benefits of a rural development loan are zero-down financing and the ability to finance repairs. To qualify, the home must be in a rural area, you must be income-eligible, and it must be your primary residence.

To see, if the location of the home qualifies as rural, you can check on this page of the United States Department of Agriculture (USDA) Rural Development's website and this page to see if you’re income-eligible. “This program helps lenders work with low and moderate income families living in rural areas to make homeownership a reality. Providing affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas,” according to the USDA. (For more, see: How to Get a No-Down-Payment Mortgage.)

VA Loans

Benefits of a Veterans Administration (VA) loan:

  • Flexible credit requirements
  • Lower rates
  • Zero down payment
  • No monthly mortgage insurance

You probably already knew about VA loans, but they’re still worth mentioning. To qualify, you must be on active duty, on reserve, or a widow or widower of a veteran. (For more, see: The Unique Advantages of VA Mortgages.)

Reverse Mortgage

reverse mortgage releases equity in your home in one lump sum or in multiple payments. You’re not required to pay the loan until death, the sale of your home, or when you leave it. In order to qualify, you must be at least 62 years old (some lenders set the minimum age at 60). If you’re desperate for cash flow, this type of loan should be considered, but be aware of the dangers of high upfront fees and the possibility of losing your home. You must be able to meet loan obligations, property taxes, insurance, home maintenance costs and other requirements. (For more, see: Do You Qualify for a Reverse Mortgage?)

FHA Back to Work Program

If you previously had to deal with a bankruptcyforeclosureshort sale or deed-in-lieu, then you will have an opportunity to be a homeowner again through this type of loan. The waiting period is one year and to qualify you must have paid all debts on time over the past 12 months.

The Bottom Line

The five types of mortgage loans above aren’t the most popular or well known, but they have helped a lot of potential homebuyers realize their American dream. (For more, see: Are You Ready to Buy a House?)

By Dan Moskowitz - To view the original article click here

Posted by Jackie A. Graves on December 28th, 2016 5:08 AM

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