Qualifying for a Mortgage is Easier Than You Think

  • Tuesday, February 11, 2014

Eddie O'Neil

President Coastlend Mortgage

In today’s recovering housing market, there are some powerful myths about the state of mortgage lending. The biggest of which is “you need to make a 20% down payment to qualify.” This is far from the truth. In fact, there are a number of low down-payment loans available in today’s market where as little as 3.5% of the purchase price will get you into your new home.

Working with an experienced loan officer should be your first priority. Someone who knows all the loan programs available and can help you smoothly navigate through the loan process. Choosing an inexperienced loan officer could lead to an unpleasant experience with delays, frustration and, in some cases, being denied when you shouldn’t have been.

What are the main low down-payment loans? They include FHA, Conventional, USDA, VA and our new 5% down with no PMI. Let’s briefly touch on each one.

- FHA loans have traditionally been the “first time buyer” loan of choice. Mainly because it only requires a 3.5% down payment and the down payment money can be a gift from a family member. More recently it has fallen out of favor because the monthly Private Mortgage Insurance (PMI) charge has increased, making the monthly payment more expensive than some other options. Also, the PMI remains for the life of the loan in some cases.

- Conventional loans have a maximum loan amount of $417,000 in Charleston and the rest of South Carolina. These loans require a minimum 5% down payment and most have PMI, but the PMI charge is less than that of FHA in most cases.

- USDA loans are reserved for rural areas. They require little-to-no down payment. It’s a great program if your home is located in a designated rural area. Feel free to contact Coastlend Mortgage to see if your area qualifies.

- VA is considered the best low down-payment loan program available because there is no down payment required and no PMI. In addition, interest rates are less than those of a conventional loan. The catch is you need to be a veteran or active duty military. It’s one of the perks for putting your life on the line for America’s freedom.

- The new 5% down, no-PMI program finishes second only to VA but is first among civilian loans. It’s popularity has grown due to FHA loans having very expensive PMI and upfront fees. Why is it so popular? Because by avoiding the PMI, it has a lower payment than FHA and standard conventional loans. Also, the 5% can be a gift from a family member, which makes it a little easier to obtain.

By eliminating PMI, a buyer can typically qualify for a higher loan amount, or more expensive home. This gives you a larger pool of homes from which to choose. It could be the difference of affording a home in the school district you desire, as opposed to one you don’t, because your payment is going to be less than an FHA or Conventional loan with PMI. This loan does require good credit with a score of 700 or higher.

If you have any questions about the loan programs mentioned please feel free to contact Eddie O’Neill from Coastlend Mortgage directly at 843-388-5763

About the author:

Eddie O’Neill is a mortgage expert with Coastlend Mortgage based in Charleston, SC. He has been a licensed professional since 2004, license # NMLS 251457, and has closed more than 750 home loans in his career. His attention to detail, commitment to quality and competitive lending has earned him the respect and praise from clients and colleagues alike. Please direct any questions to eddie@coastlendmortgage.com or 843-388-5763

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