How to Choose a Loan Program
Does the idea of deciding on a home loan make your head spin? You may have questions like these:
- Why would someone choose a Rural Development loan (USDA) over a Conventional Loan?
- Why did my other lender tell me the VA loan isn’t the best option for me?
- How do you know if you can trust your Loan Officer?
At Residential Mortgage Network, Inc., it doesn’t matter to us financially or procedurally which one you choose. We truly have your best interest at heart. We don’t have any reason to guide you towards one program over another, except that we really believe it’s the best option for you. Unlike most lenders, we have the required authority to underwrite and approve VA and FHA loans on our own. Because of this, we are able to process and close all loans in two weeks regardless of loan program. Our staff has vast expertise of the different regulations and documentation requirements for each of these 4 programs. This allows us to immediately confirm your eligibility at the time of pre-approval and communicate all required documentation upfront to ensure there are no surprises down the road. Many lenders don’t have the underwriting capability or aren’t knowledgeable enough of all 4 loan programs. As a result, other lenders will often discourage some of these loan options, usually citing reasons that are simply untrue.
Below is some basic information to consider about each of our 4 loan programs:
If you are an eligible veteran, the VA loan program will almost certainly be the best option for you in every situation. VA offers fixed rate financing up to 100% of the sales price (no required down payment!) at a below market interest rate that is sometimes half a point better than Conventional. VA loans have no monthly mortgage insurance. You also are exempt from the VA funding fee if you have a 10% or greater service connected disability.
Next to VA, Rural Development will usually be the best option for you if the program eligibility requirements can be met. Like VA, RD has no required down payment and offers 100% fixed rate financing at a below market rate. Rural Development has household income limits that vary by county. In addition, the RD program requires that the property be located in an eligible area. For instance, anything within the city limits of Iowa City, Coralville, Marion, or Cedar Rapids would be ineligible. However, the area doesn’t have to be quite as “rural” as you might think. For instance, the entire cities of North Liberty, Tiffin, Washington, Center Point, Newton and Grinnell are all eligible. Please reach out to RMN if you are unsure on your household income eligibility or whether a property is located in an approved area.
FHA allows as little as 3.5% down payment and has no restrictions on property location. Just like VA and RD, FHA offers a fixed, below market interest rate. Compared to Conventional financing, FHA has more lenient credit standards and FHA mortgage insurance rates do not fluctuate based on credit score. Depending on credit score and down payment preference, FHA can often be your best financing option.
RMN offers fixed rate conventional financing with as little as 3% down payment. Conventional financing is a great option to help you avoid PMI if you plan to put down 20% or more. If you prefer a smaller amount of down payment, a Conventional loan allows you to take advantage of your strong credit score and pay a reduced PMI rate. Another great program feature is that you can terminate your PMI once you reach 20% equity in your home.
These are just some of the basic features of our loan programs. Please remember that each of these programs is available to both first time and repeat home buyers. RMN’s loan originators will take the time to walk you through each option in detail and help you select the loan program that best suits your circumstances. Contact Residential Mortgage Network to get started!