Quackenbush Realty - Serving Provo, UT and surrounding communities

If you are a first time home buyer, chances are you have plenty of questions about the kind of down payment you�ll need, becoming qualified, and different loan options. Although I�m not a loan officer, I�d like to answer some of the questions you may have, and give you a very general idea of some things to consider before you make an offer on a home.

The two most common loans are Conventional, and FHA.

1) Conventional Loans: This type of loan is probably the one used most. The biggest difference between a conventional loan and an FHA loan is that a conventional loan requires a larger down payment. Generally this ends up being at least 5% of the value of the home plus around 2 � % in closing costs. If a person is self-employed or isn�t able to show much income, there are a few types of conventional loans that can be used, both require a 20% down payment. One is a stated income loan where the borrower tells the bank how much he or she makes, but is not required to prove it. The other is the no income no asset verifiable loan. With this loan, the borrower does not have to show proof of any income. The interest rate on both of these loans may be higher, but with a 20% down payment, mortgage insurance isn�t necessary.

2) FHA Loans: Federal Housing Administration loans are government insured loans that were created to help lower income families get into homes without having to pay a huge down payment. Generally, the down payment on an FHA loan is 3% plus around 2% closing costs. There are several conditions that must be met in order to obtain an FHA loan. A home purchased with an FHA loan must be owner occupied, must get an FHA appraisal, (which is more extensive than a conventional appraisal), and the price of the home must be no higher than $127,500 or you end up paying the difference plus the 5% at closing.

Another thing to consider when purchasing a home is the current interest rate. The interest rate is the percentage that a lender charges on the principle balance of the loan. Interest rates can drastically influence your mortgage payment every month.

This is a very general example:

Loan amount	Interest Rate	Monthly payment
$100,000	10%	$1022
$100,000	9%	$949
$100,000	8%	$878
$100,000	7%	$809