For anyone looking into buying a home, there are many misconceptions about the loan process. In fact, a lot of new home buyers think that the most difficult part of buying a house is getting a loan. It surprises me to learn that people believe that they must always put 20% down to get a loan, or that a loan is totally based on credit score. In this blog, I will explain about the different types of Mortgage loans available and how they can work for a first time home buyer.

First thing to understand, There are many types of loans available, here are a look at three.

1. FHA Loan – This is a mortgage insured by the Federal Housing Administration

2. Conventional Loan – This is a mortgage that is not guaranteed or insured by any government agency.

3. VA Loan – This is a home-mortgage option available to United States Veterans, Service Members.

There are some big misunderstandings about Home Loans. First, there is a myth that to buy a house you must have a 20% down payment. The second, misconception is that you must have a good credit score and the third misunderstanding is that an FHA Loan is limited.

Let’s take a look at the truth about getting a home loan. To be honest, buying a house is a pretty simple process. Most people don’t realize that the Federal government actually has lot of supportive programs in place for people to buy a house.

For instance, an FHA Loan is one of the easiest programs you can use to buy a house. It also requires the lowest down payment amount which is around 3.5%. As I said before, an FHA loan is a mortgage issued by the federal government insured lenders, which protects the lender from loss if the borrower defaults on the loan. This is a great option for the low to moderate income borrower. For example, if you were to purchase a $200,000 house then an FHA loan would only require you to make a $7,000 down payment.

As I mentioned above, a conventional loan is a mortgage that is not insured by the federal government. The lowest downpayment rate is around 5%, however It does require a higher credit score than an FHA loan would. With this type of loan, if you were to purchase a $200,000 house, You would be required to make a$10,000 down payment.

If you are a veteran, you may want to look into a VA or Veterans Affairs loan. This requires a 0% downpayment when purchasing a house. In this case, the lenders are insured by Veterans Affairs.

It is hard to believe but there are actually no Home Loans that require a 20% down payment. If you are able to afford the minimum downpayment, the additional money toward the down payment is optional to purchase a house.

Based on my years of experience, most of the home loan banks are not asking for higher down payments, but they do want you to have a stable amount of money in your bank account.

Remember, real estate is a long term investment, it’s stable, but it does have one of slowest returns.

So, there are really two options when purchasing a house, you can save up 20% of your your money to make a downpayment, and that may take several years, but it will certainly help you avoid a large bank interest. Or you can purchase your house with as little a $7000, minimizing the bank interest and own your home for rest of your life. One more thing, when you own your house, you can expect it to increase in value over time.


Contact Amazing Kim today and find out how he can help you get into the home of your dreams by filling out the contact form or calling (713)725-1703 now.