The clients we work with come from many different walks of life. We work with first-time home buyers, retirees looking to downsize, families with generous budgets and long wish-lists, and families looking to buy a modest home with the littlest cash possible out of pocket. Early in the process, we help connect our buyers with lenders to help them meet their goals.
The right mortgage for a specific purchase depends on a number of factors, including income level, credit score, down payment, house location, how much sweat equity someone is willing to invest, and other details. Buying a home is a team process, and as real estate agents, being familiar with the strengths of each loan type helps us guide you towards the best lender, loan, and home to meet your goals.
What Kind of Mortgage Can You Get?
The mortgage products available to you depend on a number of factors. The most common in the Pittsburgh metropolitan area are Conventional loans, FHA loans, VA loans, and Renovation financing loans. Here’s what makes each one unique:
Conventional Mortgages
Great for: Well-qualified, competitive buyers
Details: The Conventional mortgage is the most common option for homebuyers. These aren’t backed by any sort of government body, which means they’re funded by private lenders. Although the rate is sometimes slightly higher than FHA rates, the mortgage insurance premium is typically lower on conventional loans, and the mortgage insurance goes away once you reach 78% loan to value ratio, making Conventional loans more affordable overall. Typically, Conventional Mortgages require at least a 5% down payment, however, first-time buyers may be eligible for as little as 3% down with specific lender programs, and Allegheny County has some great grant programs available to buyers using Conventional mortgages.
FHA Mortgages
Great for: DIYers
Details: Loans from the Federal Housing Administration are designed to help people with little cash on hand and/or lower credit scores get into affordable houses. FHA loans allow for down payments as little as 3.5%, credit scores as low as 580, and low debt-to-income ratios. Because FHA mortgages are so affordable, about 46% of first-time buyers and 23% of buyers overall use them. However, appraisal standards for FHA loans are strict, which means most buyers should be ready to put in some sweat equity before their purchase. That means they may need to fix broken handrails or remove and paint over flaking surfaces, or find a generous seller that’s willing to take care of those items, before the loan is approved.
VA Mortgages
Great for: Military families
Details: VA mortgages are available to veterans, active-duty members, and military spouses at competitive rates and down payments as low as $0. Another bonus: VA mortgages don’t require private mortgage insurance, although there is a one time VA funding fee that averages 2.3% of the loan amount. Military members who receive a Basic Allowance for Housing can use their BAH to cover part or all of their mortgage payment each month. Like FHA loans, VA mortgages have strict appraisal standards.
Renovation Financing Loans
Great for: People who want to build their dream home on a budget
Details: Renovation financing loans are ideal for people who want to move into a house that needs a lot of repair or who want to move into a competitive market on a budget. With renovation financing loans, people can buy inexpensive homes, then fix them up until they’re happy with the results!
Client Success Stories With Each Mortgage Product
We’ve seen our clients succeed with each mortgage product. Here’s a quick snapshot of what each one looks like in action:
Conventional Mortgages
We’ve seen many clients use Conventional mortgages to make more attractive offers on homes they love, and are always happy to write an offer for 20% down in a competitive market. But you certainly don’t need 20% cash to close. By linking up with programs through the PA Housing Finance Agency, we have had clients write checks for less than $1,000 to purchase their home with a Conventional mortgage.
FHA Mortgages
Because FHA mortgages have such strict appraisal standards, we’ve had multiple cases where the initial appraisal failed because the house was in slight need of some TLC. In these cases, Ted and I put on our work clothes and met the clients on-site to paint and make simple repairs to bring the home up to the minimal standards. Each instance may have cost us a Saturday, but it meant that the client could move into a home they loved without having to restart their search.
In the case of the house pictured below, we were able to get a first-time buyer into a home with a 6% seller assist, meaning she got into the home with about $5,000 cash out of pocket!
VA Mortgages
VA mortgages are powerful financial tools. A client we recently worked with bought a $160,000 home while bringing less than $1,000 cash to the closing table. Just as nice: His monthly payment is less than $1,000 a month! For many neighborhoods in Pittsburgh, that’s less than rent and the security deposit—and this is for a property he owns!
Renovation Financing
Houses in East Liberty have increased in prices over the last few years. One of our clients found a fixer-upper for $100,000 that was a blank shell. Thanks to his renovation financing loan, he received an additional $100,000 to spend on his dream kitchen and bathroom, bedrooms with massive closets, gorgeous hardwood floors, and all the finishes he ever dreamed of.
If you have more questions about mortgages and mortgage products, contact us! Use theblocks@theblocksintheburgh.com or 412.926.7976. We’d be happy to talk through some of your options and help you connect with the right lender.
Cheers,
Julie & Ted