Whether you are a betting person or not, 5 to 1 is something most people would like to have.  You can!  Take an FHA or VA loan and that’s what you have: five great reasons and one that isn’t so great.

The five on the plus side are the rates, the ratios, the down payments, the streamline refinances and the assumable loan at sale.  Unfortunately, mortgage insurance is required.

The best rates currently available are those offered by the FHA and the US Department of Veterans Affairs.  These rates are lower than Fannie Mae and Freddie Mac’s rates, and when it comes to ARM’s, they have better terms that lead to lower rates.  After the initial fixed period on an ARM, the interest rate can only increase (if the index and margin dictate) 1% per year. The rate on Fannie and Freddie loans can increase up to 2% per year.

The debt to income ratio qualifications are more relaxed with FHA and VA loans, and the minimum credit score allowed is also lower than the minimum allowed by Fannie or Freddie.

If you have been in the military or you are active duty military, then you can have a VA loan which gives you 100% financing, zero down loan to the conforming loan limits.  If you haven’t been in the military, you can have an FHA loan which allows 3.5% down up to $625,000, or the highest loan limit in your area.

FHA and VA allow streamline refinances if your balance is lower than the balance when the loan was originated, and if you have not had any late payments.  Streamlines do not require financial information or an appraisal.  Not needing an appraisal in this market would help us get out of the housing crisis because everyone (for the most part) could lower their payment and have a more manageable mortgage.

When it comes time to sell the property, the loans are assumable and definitely make the property more valuable.  Confirm this with your real estate agent.

Mortgage insurance is required, with a higher cost for 30 year loans and a lower cost for 15 year loans. The maximum time that you are required to have the mortgage insurance is 5 years.  There is also a small MIP (Mortgage Insurance Premium) deposit which does not affect the loan to value, and it is paid off with the loan.

Let us demonstrate the advantages of an FHA or VA loan while rates are as low as they have ever been.