What is the most suitable mortgage for a disabled veteran?
What is the most suitable mortgage for a disabled veteran
?
Scenario:
I am a disabled veteran and live in Texas. My credit score is somewhere between 720-740 and I earn only 18,000. My husband's middle credit score is about 594, highest being 660. He earns about 50,000 in a year. We want to take out an FHA mortgage worth 82,000 by making a down amount of 3.5%. Can you help me out regarding how can we take out a suitable mortgage loan?
Solution:
Going through your query, I feel that it would be best if you take out the mortgage loan in your name. With your score, you can easily qualify for a conventional home loan apart from taking out an FHA mortgage. You can obtain an FHA mortgage as your required loan amount is within the FHA lending limits in Texas.
The advantages of taking out an FHA mortgage in comparison to a conventional home loan are that you'll have to pay comparatively low closing costs and lower down payment. The qualifying criteria for obtaining an FHA loan are also less stringent as compared to a conventional mortgage. In the present times, you can qualify for an FHA loan if your score is more than 620. However, you'll have to pay an upfront mortgage insurance premium while closing on an FHA loan. If you take out a conventional mortgage, then you don't have to pay any insurance premium when you make a down payment of 20%. So, if possible, try to arrange for the required amount if you want to take out a conventional mortgage.
Since you're a disabled veteran, you can also take out a VA loan to buy a home of your choice. However, you should obtain a Certificate of Eligibility to apply for such a loan. The Certificate states an entitlement amount, which is a portion of your mortgage loan that the VA (Department of Veterans Affairs) would guarantee for any service person. As you're a disabled veteran, you can take help of SAH (Specially Adapted Housing) program. In October 2009, VA Loan Guaranty Service has increased the maximum grant amount (by about 6.3%) available to the eligible individuals.
If your husband wants to take out the mortgage loan in his name, then he should raise his score before applying for a home loan. Check out the following tips to know how he can increase his credit score before applying for a mortgage.
Do not purchase big price items with your credit card before applying for a mortgage and closing on the loan.
Request your credit card company/companies to increase your credit limits so that it raises the percentage of your credit utilization ratio.
Use your old credit cards at least once in 6 months in order to keep them active. However, pay your outstanding balance every month.
Order and monitor your credit reports to check for any mistakes. Dispute inaccurate entries if any.
Don't close your oldest credit account as it can reduce your credit limit instantly.
Avoid opening new account till you have closed on a mortgage loan.
If you want to take out the mortgage loan immediately, then my suggestion would be to obtain the loan in your name for the time being till your husband's credit score increases to 620. Then, if required, you can refinance the home loan and include both your names on the new mortgage loan.
At any point of time, you can take help of mortgage community forums to get answers to your queries. You simply need to ask mortgage questions in such a forum and the experts in the field will answer them thus helping you to select a suitable home loan.
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