Choosing the Right Loan Product for You with Academy Mortgage

by | Jan 2, 2019 | Mortgage

When deciding which loan program is the best for you, Academy Mortgage will thoroughly examine your financial situation and provide you with examples and comparisons to help determine which product best fits your needs. All home buyers have unique home financing needs. Academy will make every effort to find the best loan program and pricing for your situation and to provide superior value.

It is extremely important to get pre-approved as early in the loan process as possible so there are no surprises with qualification criteria like credit scores, debt-to-income limitations, etc.

Comparison of Three Popular Loan Types: Conventional Loans, FHA Loans, and USDA Loans
*Conventional *FHA *USDA
Minimum Down Payment 3% (can be homebuyer’s and/or gift funds) 3.5% (can be homebuyer’s and/or gift funds) 0%
Maximum Seller Assist 3% (< 10% down payment)
6% (> 10% down payment)		 6% 6%
Mortgage Insurance (MI) Private Mortgage Insurance (PMI): Dependent on credit score, down payment, loan purpose, and loan term. Two forms of insurance:

  1. Upfront Mortgage Insurance Premium (UFMIP): Factored at 1.75% of the base loan amount (can be financed in the loan); AND
  2. Monthly Mortgage Insurance Premium (MIP): Usually factored at 0.85% of the base loan amount.
 Two forms of insurance:

  1. One-time, upfront charge or guarantee fee: Factored at 2% of the base loan amount (can be financed in the loan); AND
  2. Monthly USDA fee: Factored at .50% of the base loan amount.
Potential Advantages
  • Mortgage insurance can be canceled once 2 years have elapsed and 20% equity is achieved.
  • Can use gift funds for down payment.
  • Less money out-of-pocket.
  • Lower credit score requirements.
  • Less stringent income requirements.
  • Can use gift funds for down payment.
  • Less expensive MI costs than FHA and Conventional Loans.
  • Little to no money out-ofpocket.
  • Can use gift funds to lower the monthly payment.
Potential Disadvantages
  • May have higher MI costs than FHA and USDA Loans.
  • Higher credit score requirements.
  • More stringent income requirements.
  • Higher MI costs than USDA Loans but may be lower than Conventional Loans.
  • MI included for life of the loan and cannot be canceled.
  • Monthly guarantee fee included for life of the loan.
  • More stringent income requirements.
  • Only allowed in designated rural areas.
Comparison of Three Popular Loan Types: Conventional Loans, FHA Loans, and VA Loans
*Conventional *FHA *VA
Minimum Down Payment 3% (can be homebuyer’s and/or gift funds) 3.5% (can be homebuyer’s and/or gift funds) 0% (as long as the sales price doesn’t exceed the appraised value)
Maximum Seller Assist 3% (< 10% down payment)
6% (> 10% down payment)		 6% 6%
Mortgage Insurance (MI) Private Mortgage Insurance (PMI): Dependent on credit score, down payment, loan purpose, and loan term. Two forms of insurance:

  1. Upfront Mortgage Insurance Premium (UFMIP): Factored at 1.75% of the base loan amount (can be financed in the loan); AND
  2. Monthly Mortgage Insurance Premium (MIP): Usually factored at 0.85% of the base loan amount.
 Funding Fee: One-time, upfront charge that must be paid at closing but may be financed in the loan. Factored as a percentage of the loan amount, which varies based on the type of loan, the borrower’s military category, etc.
Potential Advantages
  • Mortgage insurance can be canceled once 2 years have elapsed and 20% equity is achieved.
  • Can use gift funds for down payment.
  • Less money out-of-pocket.
  • Lower credit score requirements.
  • Less stringent income requirements.
  • Can use gift funds for down payment.
  • May have lower MI costs.
  • No monthly MI required.
  • Little to no money out-ofpocket.
  • The seller can pay for some closing costs.
  • VA rules limit the amount charged for closing costs.
Potential Disadvantages
  • May have higher MI costs.
  • Higher credit score requirements.
  • More stringent income requirements.
  • MI included for life of the loan and cannot be canceled.
  • Upfront funding fee.
  • Veteran must be income and credit-qualified.

Call your Academy Loan Officer to discuss the right loan product for you.

*Conventional sample loan scenario: $200,000 purchase price, $190,000 loan amount, 5% down payment, $1,277.94/month (PITI), 30-year fixed 4.0% interest rate, 4.938% APR.
*FHA sample loan scenario: $196,377 loan amount, 3.5% down payment, $1,274.81/month (PITI), 30-year fixed 4.0% interest rate, 5.191% APR. The MI requirements may change if the homebuyer is putting down more than 3.5% or desires a term less than 30 years.
*USDA sample loan scenario: $204,081 loan amount, 0% down payment, $1,261.70/month (PITI), 30-year fixed 4.0% interest rate, 4.875% APR.
*VA sample loan scenario: $206,600 loan amount, 0% down payment, $1,181.53/month (PITI), 30-year fixed 4.0% interest rate, 4.432% APR.

All mortgage products are subject to credit and property approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Additional conditions, qualifications, and restrictions may apply. This is not an offer for extension of credit or a commitment to lend. Please contact Academy Mortgage for more information.

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