Subscribe via RSS Feed Connect with us on LinkedIn Connect with us on Flickr
Apply Online

Mortgage Programs

A mortgage is a specific type of loan.  The loan is made using real estate as collateral.  The loan can be used to purchase the real estate or an existing loan can be refinanced to accommodate multiple goals.  In order to fit the different needs and goals of customers, different mortgage programs are available.

Conventional Loans

Conventional loans refer to the loans supported by the Fannie Mae and Freddie Mac organizations.  These organizations are regulated by the federal government, yet they operate somewhat independently of the government.  The government does not lend money directly to borrowers.  Mortgage lenders and banks offer the loans using the guidelines and rules of the Fannie Mae and Freddie Mac associations.Conventional loans refer to the loans supported by the Fannie Mae and Freddie Mac organizations.  These organizations are regulated by the federal government, yet they operate somewhat independently of the government.  The government does not lend money directly to borrowers.  Mortgage lenders and banks offer the loans using the guidelines and rules of the Fannie Mae and Freddie Mac associations.

First Time Home Buyer Programs

A first time home buyer has special considerations when applying for a mortgage loan.  Since the borrower does not have a mortgage history other factors have to be considered in order to qualify for the loan.  Several items will be reviewed during the loan process such as employment, credit, available funds, previous rent history, and the length of time the borrower has been on their job as well as within the industry that they work.

In order to qualify for a first home it is very important to provide all information to the loan officer.  The loan officer is working for you to represent you as a responsible borrower that will fulfill their obligations to repay the loan.  In order to represent you in the best possible manner the loan officer will need your full cooperation in providing several types of documents. Depending on the first time home buyer program used, no money down is possible (USDA and VA).

FHA Loans

The Federal Housing Authority (FHA) insures certain loans provided by mortgage bankers, credit unions and banks.  The FHA does not provide the money to purchase homes; they provide insurance to the lender in the event the loan is not repaid.  FHA sets out guidelines and rules regarding loan qualifications and the approval process.  Lenders that are registered with FHA and in good standing can offer these types of loans to borrowers.

FHA mortgage loans have slightly relaxed standards in regards to credit files when compared to conventional loans.  This type of mortgage also allows for compensating factors to help people qualify for a loan in the absence of traditional credit.

The rates for an FHA loan are very similar to conventional mortgage rates.  This allows borrowers to obtain financing at an affordable rate and attractive terms.  In addition the private mortgage insurance rate is low which keeps the payments low for most borrowers.

USDA Rural Housing Loans

The United States Department of Agriculture (USDA) offers mortgages for people that wish to purchase or refinance a home located in a rural area.  The USDA offers these loans through mortgage bankers, banks and credit unions.  The general process is to have the file reviewed and underwritten by the mortgage banker or bank.  Then the completed file is forwarded to the nearest USDA field office for final review.

USDA allows borrowers to take out a loan up to the appraised value of the home.  The closing costs, as well as the funding fee, can be added to the loan amount if the appraised value is high enough.  This means that a borrower can purchase a home with absolutely no money out of pocket.

Another unique feature of the USDA home loans is the absence of Private Mortgage Insurance.  This means that every dollar the borrower pays towards the loan will go to either interest or principal.  The credit guidelines for the USDA loans are very similar to the FHA and VA guidelines.

VA Loans

The Veterans Administration (VA) offers mortgage loans to qualified veterans and current enlisted personnel.  The VA home loan is very attractive for a number of reasons.  Most notably, a VA mortgage does not require any down payment.  In addition, VA mortgages are not subject to Private Mortgage Insurance.

Besides the competitive interest rates and no down payments, homeowners with VA loans are free to pay extra money towards their loan with no pre-payment penalty.  Should the homeowner decide to sell the home it is possible for another qualifying individual to assume the existing VA loan.

The VA does not administer or offer the loans; rather, they oversee the guidelines and lending policies of mortgage bankers and banks.  This means that various lenders can offer the VA loans in order to reach more people in a timely manner.

Jumbo Loans

Jumbo loans refer to mortgages of a certain dollar amount.  Today’s current maximum conventional mortgage amount is $417,000.  This means that any mortgage loan above $417,000 is a Jumbo loan.  A Jumbo loan will typically have a slightly higher interest rate than conventional loans.

The interest rate is higher due to one factor; risk.  Since the loan is so much bigger than typical loans, there is a greater chance that the loan will not be repaid.  For this reason the rates are higher to accommodate this risk.

Jumbo loans are offered with different terms such as 30 year and 15 year fixed rates as well as adjustable rates with a short fixed term such as 1, 3, 5 or 7 years.  The adjustable rate loans usually offer a much better interest rate than the fixed rate loans. Loan size will determine maximum loan to value that can be financed.