LOAN TYPES

CONVENTIONAL LOANS

Conforming:

This loan can accommodate all borrowers. It has a maximum loan limit of $417,000.00. Its traditional down payment is 5%, but it requires mortgage insurance unless the borrower puts in a down payment of at least 20% (as determined by Freddie Mac & Fannie Mae).

Conforming Plus: 

Same as "conforming" but the loan amounts range from $417,001 - $729,750 in high cost areas (as determined by Freddie Mac/Fannie Mae).

Jumbo  (Non-Conforming):

This loan is to accommodate larger loan amounts. Typically loan amounts over $600,300 is considered a Jumbo loan and is subject to program variations and pricing adjustments due to the large nature of the loan. However, there are also advantages to Jumbo loans that benefit the large home purchaser.

 

VA LOANS

This loan is reserved for use by veterans of military service. Active duty, retired, and reservists are eligible depending upon length of service and status of discharge. A Certificate of Eligibility is required, which your loan officer can help you obtain with a copy of your DD214. This loan can provide 100 percent financing for the purchase of a home and does not require any monthly mortgage insurance, a common requirement of other down payment loans.

VA home loans are guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase, rate & term refinance or cash out refinance of a primary residence.

Benefits of VA loans include:

  • Common sense underwriting guidelines (with respect to credit, debt to income ratios, etc.)
  • Little or no down payment
  • Competitive mortgage rates
  • No monthly mortgage insurance premium


VA Home Loan Guaranty Services also provides counseling and assistance to veteran borrowers having financial difficulties or facing default.

Even though a mortgage insurance premium is not required, borrowers are charged a small funding fee for VA mortgages, which guarantees the loan. The fee may be paid in cash by the buyer or seller, or it may be financed and included in the loan amount.

A VA mortgage can be used to buy a home, build or even improve a home with energy-saving features such as solar or heating & cooling systems, water heaters, insulation, weather- stripping & caulking, storm windows & doors or other energy efficient improvements approved by VA.

A satisfactory Certificate of Eligibility from VA must be presented to be eligible for the loan program.


FHA LOANS

This program is primarily used by first-time home buyers, although not required, and provides the most flexibility and options available. It allows the borrower to have higher debt and less down payment than other loan programs. It does have a maximum loan amount depending upon where you are purchasing. Down payment assistance programs and seller-paid closing costs can be used to allow a borrower to purchase a home with little or nothing out of pocket.

The Federal Housing Administration (FHA) has been helping borrowers realize the American dream of affordable home ownership since 1934. FHA financing advantages include:

  • Low Down Payment: as little as 3.5%

  • Flexible Credit Guidelines: generally easier to qualify than with conventional home financing

  • Competitive Mortgage Rates

  • Down Payment Assistance: the down payment for your FHA loan can come from a gift, and reserves are not an automatic requirement.


FHA is one of the few remaining programs that will allow up to 85% cash out on a refinance and will lend in declining markets without an automatic reduction in loan-to- value*.

FHA insures single & multi-family (up to 4 unit) homes & condominiums. Financing options include traditional fixed rate products, adjustable rate mortgages and temporary interest rate buy-downs.

Best of all, your loan is insured by FHA which gives lenders greater flexibility with our lending guidelines.

FHA Footnotes:

* Appraisal must support mortgage loan-to-value.


CONSTRUCTION LOANS  

This loan is an interim source of financing that is used while constructing a new home. Funds are made available on a "Draw" basis to pay for the construction as the home is being built. A long-term loan is pre-approved and available upon the completion of the home, and will pay off the construction loan once the home is finished. This loan can often be obtained in either the borrower's name or the contractor’s name. Also available are one time close construction programs in which the long-term financing and construction loans are closed at the same time.

FIXED or ADJUSTABLE

FIXED RATE MORTGAGE

A Fixed Rate Mortgage is a home loan that provides a fixed rate for the entire term of the mortgage loan. The monthly payments are fixed over the life of the loan because the interest rate does not change which protects you if market mortgage rates go up. Additionally, fixed rate mortgages provide stability so you can better manage your monthly finances.

Although the most common fixed rate mortgage is the 30 year fixed rate, fixed rate mortgages are typically offered in the following terms: 15 year, 20 year, 25 year and 30 year.


ADJUSTABLE RATE MORTGAGE

An adjustable rate mortgage (ARM) is a mortgaeg loan where the interest rate on the note is periodically adjusted based on a variety of indices. Among the most common indices are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an index, rather than using other indices. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate (alternatively, the term of the loan may change).

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PURCHASE & REFINANCE

HOME LOAN PURCHASE

Home Loan Pre-Qualification vs. Pre-Approval:

While shopping for a home loan, brokers and lenders will offer to pre-qualify or pre- approve you for a mortgage. Home loan pre-qualification and pre-approval are different and distinct processes, so it is important for you to understand the difference.


Pre-Qualified:

A loan officer or loan processor working for a mortgage lender or broker can typically pre-qualify you for a home loan within an hour. Getting pre-qualified for a home loan is a good first step that will let you know if you should proceed to the pre-approval process. To get pre-qualified you will need to complete a mortgage application and allow the broker or lender to pull your credit. They will review the mortgage application and your credit and let your know if you are pre-qualified.


Pre-Approved:

Only a mortgage underwriter can pre-approve you for a home loan, loan officers and processors can not. Typically mortgage brokers do not have underwriters on staff, so they typically can not pre-approve your home loan. A valid pre-approval is the best tool you can have when shopping for a new home. The key is to ensure that it is valid. A valid pre-approval has been underwritten by an authorized underwriter (an underwriter is the final person that says your loan is approved). If an underwriter pre-approves your home loan application upfront, all you have to do is find the home you want, have it appraised, and then you should be able to close in just a few days. Some mortgage brokers and lenders will issue pre-approvals that have not been reviewed by an authorized underwriter, be sure to ask.


To get pre-approved for a home loan you will need to provide the underwriter with your income and asset documentation (W2’s, Bank Statements, etc). The underwriter will review your credit, mortgage application, documentation, and then approve you for a set loan amount and property value. Once you have been pre-approved for a home loan you are ready to start shopping. The process typically takes a couple of days.


Knowing exactly what type of home loan you can obtain will allow you to shop and negotiate with confidence. For example, you could inform a seller that you are pre- approved for the mortgage and you are prepared to close next week. If the seller needs to close quickly, it will not matter if there is another buyer that cannot close for weeks or months. Plus, sellers do not like to take their properties off of the market for long periods of time. The ability to close quickly is one way to get a great deal.


To get pre-approved for a home mortgage you will need to provide the underwriter with your income and asset documentation (W2’s, Bank Statements, etc). The underwriter will review your credit and then approve you for a set loan amount and property value. Once you have a pre-approved real estate mortgage you are ready to start shopping.


HOME LOAN REFINANCE

Refinance Today – What it can do for you:

Completing a Mortgage Refinance can be a smart way to improve for your financial situation. Depending on your circumstances you may want to undergo mortgage refinancing for any of the following reasons:

  • Mortgage Refinance To Lower Your Mortgage Rate & Payment
Even a small reduction in your mortgage rate can have a significant impact in the long-run. Refinancing to lower your monthly payment frees up cash flow, so you can utilize your money more effectively. Furthermore, if you plan to stay in your home for a long time, you may want to mortgage refinance and consider buying down your rate to reduce your monthly payment. If you have equity in your home, home loan refinancing could enable you to lower your mortgage payment significantly.
  • Mortgage Refinance To Consolidate Debt
If you have debt outside of your mortgage and you have equity in your home, it’s time to refinance your home loan. You are likely paying a much higher interest rate on credit cards and auto loans, and by mortgage refinancing you could roll all of these debts into one tax deductible loan. Credit card interest rates can be as high as 25%. Refinancing your home to pay off and consolidate debt under one low mortgage rate is a smart maneuver. A well structured home refinance could save you a great deal of money.

  • Mortgage Refinance To Get Cash Out Of Your Home
Completing a mortgage refinance can get you cash out of your home for a variety of purposes, including education expenses, vacations, other investments, home improvements and more. Mortgage refinancing is a much better option than using credit cards or personal loans.
  • Mortgage Refinance To Pay off Your Home Loan Faster
A mortgage refinance can be structured to pay off your home quicker. Instead of refinancing into a typical 30 year mortgage, you could get a 20, 15, or even 10 year fixed so you pay it off quicker. Also, many home refinance loans give you the option of paying more on your principal every month so you can pay down your home loan fast as well. Refinancing allows you to move into any type of mortgage loan.
  • Mortgage Refinance To Move To A Fixed Rate From An ARM
Adjustable Rate Mortgages (ARMs) are great when mortgage rates are low. However, as rates increase that ARM quickly becomes a significant burden. That’s when it is time to consider mortgage refinancing into a fixed rate loan. Especially if you plan on staying in your home for a few years, a refinancing your mortgage makes a great deal of sense. Refinancing into a stable fixed rate may give you peace of mind. More on fixed rate mortgages.
  • Mortgage Refinance To Eliminate Private Mortgage Insurance (PMI)
If you were unable to make a down payment of at least 20% when you first obtained your mortgage loan, you may be paying PMI. If your house has appreciated and/or you have paid down your existing mortgage, you may be able to mortgage refinance your home to eliminate your monthly PMI payment. Along with possibly lowering your rate, a mortgage refinance could reduce your monthly mortgage payment considerably.


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