Consider alternatives to Conventional financing

Conventional Mortgage- We are all familiar with the term. Most American homeowners have one. In this market, I would ask borrowers to consider some other options such as USDA Rural or an FHA insured mortgage.

Why?

1. Flexibility on down payment
2. Better interest rates for credit scores between 660 and 720.

In Arizona, a conventional mortgage requires 10% down with very few exceptions. If you have a credit score below 700, your interest rate will be substantially higher than if you have a 740 credit score (on a conventional loan).

Here are a few other options:

USDA Rural Loan: Zero down payment mortgage designed for lower to middle income buyers.

Plusses:

1. Zero Down
2. No Mortgage Insurance
3. Competitive Rates

Caveats:

1. Income restrictions
2. In lieu of mortgage insurance, there is a funding fee (roughly 2% of the loan amount) to offset losses. This amount can be "rolled" into the loan.
3. House must be in an outlying area. Here is a link to USDA's website to determine if a property is eligible. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=rbs

FHA Insured loan: Mortgages intended to allow an affordable option to a conventional loan. These mortgages are insured by the Federal Government.

Plusses:

1. 3.5% Down Payment
2. No sliding scale on interest rates as long as the credit score exceeds 659
3. No restrictions on where the home is located in the U.S.

Caveats:

1. Loan limit in Pima County is $316,250
2. Mortgage Insurance has two parts: An upfront portion (which is "rolled" into the loan) and a monthly portion which is included in the payment.

These loan products are alternatives to conventional financing for the purchase of a primary residence only. There has been some sort of stigma attached to loans that are not "Fannie" or Freddie" (Conventional) loans, but in this market, I think these are two fantastic options. They are not limited to first time homebuyers. For more information, please call me.

____________________

Patrick Randles

(520)850-7485

Sunstreet Mortgage LLC

Tucson, AZ 85718