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Understanding Traditional Mortgage Loan Options in Georgia

Understanding the world of mortgage loans can be daunting, especially with the variety

of options available to homebuyers in Georgia and the “advertised” interest rates

promoted online. Understanding the different traditional mortgage loan types will help

you make an informed decision that best suits your financial situation and

homeownership goals.

The first place to start if you consider buying a home is to secure your financing. Here’s

a comprehensive guide to the traditional mortgage loan options available in Georgia.

Conventional Loans

Conventional loans are not insured or guaranteed by the federal government. They are

typically offered by private lenders such as banks, credit unions, and mortgage

companies. These loans generally require a minimum down payment of 3-5%, but a 20%

down payment is often recommended to avoid private mortgage insurance (PMI).

Currently this loan has a loan limit for 2024 of $726,200 for most areas in Georgia, but it

can vary by county. This is the only traditional mortgage product that can be used to

purchase a home that will not be your primary residence. It is commonly used to

purchase a second home or investment property.

Credit Requirements: Typically requires a credit score of at least 680. This product has

stricter credit and income requirements compared to government-backed loans.

They charge PMI to the borrower if the down payment is less than 20%. Potentially

offers lower interest rates for borrowers with good credit.

FHA Loans

This is the most common loan because it is backed by the Federal Housing

Administration (FHA), these loans are designed to help first-time homebuyers and those

with lower credit scores. The minimum down payment is 3.5% and with this loan, there

are government programs that provide down payment assistance to offset this expense

for those who qualify. The loan limits vary by county; for most areas in Georgia, the limit

is $472,030 for single-family homes. This loan requires both an upfront mortgage

insurance premium (UFMIP) and annual mortgage insurance premiums (MIP).

Credit Requirements: Requires a minimum credit score of 580 with a 3.5% down

payment, but borrowers with a score between 500-579 may qualify with a 10% down

payment. Not all lenders will work on credit scores under 620 so you need to discuss

your estimated credit score with your Realtor first to ensure you are referred to a lender

that can work with your situation.

VA Loans

This loan is only available to veterans, active-duty service members, and certain

members of the National Guard and Reserves, VA loans are backed by the Department

of Veterans Affairs. Those who qualify with VA eligibility can use this loan multiple times

over their lifetime and possibly even on multiple homes at once. This is one of very few

loan options that have no required down payment and no mortgage insurance

premiums added to the payment. Additionally there are no loan limits for qualified

borrowers, but limits may apply for loans with no down payment, and the VA may

require the borrower pay a down payment or elevated VA funding fee based on loan


Credit Requirements: The VA doesn't set a minimum credit score for its loans. Instead,

they rely on loan originators to ensure a borrower is a satisfactory credit risk. Mortgage

lenders who underwrite VA loans typically require a FICO score of at least 620.

USDA Loans

These loans are backed by the U.S. Department of Agriculture, USDA loans are designed

for rural and suburban homebuyers who meet certain income requirements. These

loans have geographical restrictions but have no down payment required. They

generally require a minimum credit score of 640 and the borrower must meet certain

income cap limits, which vary by location and household size. Additionally they offer

lower mortgage insurance costs compared to FHA loans.

Jumbo Loans

Jumbo loans exceed the conforming loan limits set by the Federal Housing Finance

Agency (FHFA), currently set at $726,200, and are used to finance high-value properties.

A Jumbo loan will require a down payment of at least 10-30%. The amount of the down

payment may also increase as the loan amount increases. These loans come with

higher interest rates than conforming or government backed loans and a higher

minimum credit score, generally over 720.

A key piece of advice would be to wait until your credit score is at least 620 before you

speak to a lender. Any score under 620 will cost you higher fees in closing costs and

result in an elevated interest rate. Additionally, make sure you have a realtor helping you

who understands loans and requirements, offering you educated support in helping

secure your financing properly.

Government-backed mortgages were created to promote homeownership by making it

more affordable and are the number one product consumers qualify for. They come

guaranteed by the U.S. federal government, meaning if a borrower doesn't make

payments, the government will step in and cover some of the lender's losses. These are

great loan options for the majority of borrowers but come with caveats such as third

party property inspections that could deny the loan for any properties in need of repairs

or improvements.

Selecting the right mortgage involves evaluating your financial situation, credit score,

down payment ability, and long-term homeownership goals. Consulting with a

knowledgeable mortgage lender or financial advisor can help you navigate these

options and determine the best fit for your needs. Whether you're a first-time

homebuyer, a veteran, or looking to purchase a high-value property, understanding these

traditional mortgage loan options will empower you to make an informed decision in the

Georgia real estate market, and help alleviate unnecessary headaches in the long run.

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