Home Purchase Loans In Montgomery

Montgomery’s housing market remains one of the most affordable in the country, which is advantageous for homeowners. The housing market is slightly competitive and highly stable and steady.

Purchase Loan Programs in Montgomery

Montgomery, Alabama, home buyers have various mortgage loan options. The most common among them are the following:

Montgomery Conventional – Conforming Loans

A conventional mortgage is a home loan not insured by the federal government and offers flexible loan terms and conditions. Most mortgages in the United States are conventional, and their interest rates may be fixed or variable. They typically necessitate a solid credit score of 620, a sizeable down payment of 5%, and competitive interest rates. However, well-qualified borrowers may take advantage of the 3% down payment.

Conventional-conforming loans comply with specific Fannie Mae and Freddie Mac guidelines, including loan limits and borrower requirements. Annually, the Federal Housing Finance Agency (FHFA) modifies these limits. Montgomery County conforming loan limits for 2023 are $726,200 for a single-family home, $929,850 for a duplex, $1,123,900 for a triplex, and $1,396,800 for a quadplex. These loans may require mortgage insurance for down payments of less than 20%. Non-conforming loans, on the other hand, do not adhere to these guidelines and typically cater to specific requirements, such as lower credit scores or properties with a higher value. Due to the increased lender risk, they may have higher rates and down payments.

Essential characteristics and eligibility requirements vary between these loan categories. Typically, conventional-conforming loans require a minimum FICO® Score of 620, a debt-to-income ratio (DTI) of 45% or less, and a down payment of at least 5%. Non-conforming loans, particularly jumbo loans, typically require a larger down payment, an excellent credit score, and sometimes cash reserves. Non-conforming loan terms can vary considerably and are frequently lender-specific. 

Montgomery FHA Home Loans

FHA home loans are mortgages insured by the Federal Housing Administration (FHA) and provided by FHA-approved lenders. These loans are typically less difficult to qualify for than conventional loans and require a smaller down payment. However, you’ll owe mortgage insurance premiums (MIPs) if you have a loan balance.

The primary distinction between FHA and conventional loans is whether or not they are federally insured. The federal government does not guarantee conventional loans, so extending this loan is riskier for the lender. On the other hand, FHA loans are backed by the government, and because they carry less risk, they can typically offer better terms.

To qualify for an FHA loan, borrowers must satisfy certain requirements, including the residence they are considering, which must be appraised by a certified FHA appraiser. You cannot qualify for a new FHA loan if the home you’re considering is an investment property or a second home; it must be your primary residence. You must move in within sixty days of the closing date. Additionally, your down payment will be determined by your credit score. If your credit score meets or exceeds the minimum requirement, you may be eligible for a 3.5% down payment.

Montgomery VA Home Loans

A VA home loan in Montgomery, Alabama, is a mortgage option primarily available to Veterans, Servicemembers, and qualifying spouses. Private lenders make these loans, but they are backed by the Department of Veterans Affairs (VA), which provides various benefits such as no down payment, low-interest rates, and reduced closing expenses. Additionally, the VA offers rate-lowering refinancing, Native American loans, and grants for disabled Veterans.

VA home loans have several distinguishing qualities. For example, there is no down payment necessary, and loan limitations vary by county. The usual loan maximum in 2023 is $726,200, but it can go up to $1,089,300 in some counties. Furthermore, if you default on a loan worth more than $144,000, VA will guarantee 25% of the debt.

Veterans and Servicemembers must have a specific military service history to be eligible, which can be demonstrated by getting a Certificate of Eligibility (COE). Specific conditions apply to different eras, such as the Gulf War or WWII. National Guard and Reserve members are also eligible, with a minimum of six years of service. Partial eligibility may be attainable, and surviving spouses may also be eligible. This program is not available to the children of veterans.

Montgomery USDA Home Loans

A USDA home loan is a mortgage program supported by the United States Department of Agriculture (USDA) that assists low- and moderate-income families in purchasing homes in suitable rural areas. In Montgomery, Alabama, two types of USDA home loans are available: the USDA Guaranteed Loan and the USDA Direct Loan. The USDA Guaranteed Loan, backed by the USDA but issued by a private lender, is offered to low- to middle-income households. The USDA Direct Loan, on the other hand, is less widely available and is intended to assist low-income borrowers in rural areas in obtaining homeownership. In this scenario, the USDA functions as the lender, providing the funding to acquire the property.

The primary distinctions between the two loan types are the lender, income restrictions, term length, and interest rate. The USDA provides direct loans, while private lenders issue guaranteed site loans. Guaranteed loans have higher income limits than direct loans. The fixed term for direct loans is 33 or 38 years, while the term for guaranteed loans is 30 years. The interest rate on direct loans is based on the current market rate, whereas the interest rate on guaranteed loans is negotiated with the lender.

Applicants must satisfy several criteria to qualify for a USDA-guaranteed home loan in Montgomery, Alabama. They must also be a U.S. Citizen, a U.S. non-citizen national, or a Qualified Alien and meet the income eligibility requirements (income cannot exceed 115% of the median household income). In addition, their monthly housing costs (principal and interest on the mortgage, property taxes, and insurance) must not exceed a specified percentage of their total monthly income (29% ratio). Additional factors may be considered when determining an applicant’s eligibility for a USDA-guaranteed home loan.

Montgomery Construction Loans

A construction home loan is a specific financial instrument used to fund the development of a new residential property. Unlike a traditional mortgage, a construction loan is usually only for the duration of the construction, which can range from six months to two years. These loans often include higher interest rates and a 20% down payment. As the construction project continues, the funds are disbursed in phases, and the loan may be converted into a regular mortgage upon project completion. 

Regular construction loans and one-time close construction loans are the two primary types of construction loans. A standard construction loan only covers the construction phase and requires the borrower to apply for a separate mortgage once the construction is completed. This necessitates two loan applications as well as two sets of closing costs. On the other hand, a construction-to-permanent loan combines the construction loan and the long-term mortgage into a single loan with one application and one set of closing charges.

The primary advantages of a construction loan with a single closing are its simplicity and cost-effectiveness. It provides fixed interest rates, necessitates a single qualification procedure, and reduces the risk for borrowers. The loan combines construction and financing costs, necessitating only a single closing and saving time and money. In addition, it reduces total expenses by eradicating the need for multiple transactions and fees. This method streamlines the homebuilding process, making it a popular and consumer-friendly alternative.

Montgomery Jumbo Home Loans

A jumbo home loan in Montgomery, Alabama, is a mortgage that exceeds the Fannie Mae and Freddie Mac conforming loan limits. These loans are designed to finance luxury homes or properties in local real estate markets that are highly competitive. They are called “jumbo” because they exceed conventional loan limits.

There are many advantages to obtaining a jumbo loan. The primary benefit is that they enable consumers to finance pricier homes without taking out multiple loans. This can be especially advantageous in areas with high property values. Some lenders also offer jumbo renovation loans, which provide funds to purchase or refinance a property in addition to any necessary renovations. However, because of the higher risk the lender assumes, interest rates on jumbo loans can be marginally higher.

To be eligible for a jumbo loan in Montgomery, Alabama, borrowers must satisfy specific eligibility criteria. Typical qualifications include a high credit score (typically 720 or higher), a low debt-to-income (DTI) ratio, and adequate cash reserves. The quantity of the loan can range between $726,200 and $2,000,000. Some lenders may also require confirmation of income and assets and an appraisal to establish the property’s value.

Montgomery Non-Qualified Mortgage Loans

A non-qualified mortgage (non-QM) home loan does not meet the Dodd-Frank Act and CFPB’s qualified mortgage (QM) standards. Non-QM loans are intended to assist borrowers who cannot obtain a standard mortgage due to factors such as self-employment, a lack of documentation, or other income sources. Depending on the lender and the loan program, non-QM loans may have varying standards and requirements.

Private money rehabilitation loans, bridge loans, and direct permanent-end financing for fix-and-flippers and investors are examples of non-QM loans. Asset qualifier home loans, bank statement loans, investor cash flow home loans, 1099 income loans, and ITIN mortgage loans are loans for borrowers with alternative sources of income or supporting documentation; no-doc, no-ratio, and profit and loss statement-only loans are for borrowers with little to no income verification; loans longer than thirty years, with negative amortization or interest-only payments for borrowers seeking more flexibility or lower monthly payments; and home loans for borrowers with recent foreclosure, bankruptcy, or early debtor status.

The main characteristics of non-QM loans include more flexible underwriting standards, such as higher DTI ratios or alternative income verification methods. Other advantages of non-QM loans include allowing credit scores as low as 600, not requiring personal income calculations or employment history, allowing multiple properties without being held against the borrower, providing loans to individuals with high debt or poor credit, and requiring less documentation than traditional loan products.

Apply for a Montgomery Home Purchase Loan

Capital Home Mortgage is an Alabama-based direct mortgage lender and servicer that provides a wide range of mortgage solutions to meet the needs of its customers. Whether you were born and raised in Alabama or are a newcomer to the state, our knowledgeable team at Capital Home Mortgage will work hard to find the financing package that best meets your needs and budget. We are here to help you with your housing needs, whether you are looking for a first mortgage, a refinance, or a debt consolidation loan.

Call (205) 352-1030 to speak with a Montgomery Home Loan Specialist.