Whether you’re dreaming of a rustic mountain cabin or a chic modern home, Denver offers plenty of places to hang your hat. Worried about how to finance your home once you find it? This short guide explains three types of mortgages, one of which is sure to help you call Denver home.
A conventional loan uses the standard guidelines and methods of calculations for approval. Conventional home mortgages usually require:
- Credit scores over 620
- Debt that doesn’t exceed 43 percent of your income
- Minimum down payments of 10 percent or more of the total mortgage costs
These loans include costs such as lender fees and mortgage insurance, which can drive up total cost for the borrower at the time of closing. The upside is that there are fewer hurdles to jump over on the road to approval than with other types of loans. The downside is that you need excellent credit scores to qualify for the best rates.
If you don’t have good credit, or other circumstances prohibit you from going the conventional route, FHA mortgages are another option. The Federal Housing Authority (FHA), offers a program that ensures home mortgages for people who have a difficult time getting approved elsewhere for various reasons, including:
- Lower incomes
- Lower credit scores
- A need for low down payments
- Refinancing with little equity
Under FHA program guidelines, borrowers can have debt-to-income ratios of up to 57 percent, as opposed to the 43-percent maximum for conventional loans. Other differences include a minimum down payments of 3.5 percent instead of higher down payments, and approval for people with credit scores of 580 and less.
FHA loans require one of two mortgage insurance premiums:
- An upfront premium of 1.75 percent of the loan, or
- A variable annual premium
If you are active-duty military, a Reservist, National Guard, a Veteran or a surviving spouse of any of these, you may qualify for a home loan through the Department of Veteran’s Affairs (VA). Like the FHA, the VA does not grant the loan but guarantees loans from private lenders. VA borrowers aren’t required to make a down payment on primary residences and may not have to pay closing fees. There is an upfront VA funding fee, varying from 1.25 to 3.3 percent of the loan, but this fee can be rolled into the loan. There’s no cap for the amount you can borrow, but there is a limit on the amount of liability the VA will assume, so that may affect your loan amount.
If Denver is where you want to call home sweet home, you can use this county-by-county list to see what FHA loan limits exist, or you can estimate your payment for all types of loans with this calculator. To help you with your search for the perfect Denver home, visit us at The Peak Properties Group to find the latest listings on the market.