Loan Programs

Conventional Loan

The conventional conforming loan is the traditional mortgage program. Conventional loans are conforming, meaning they follow the guidelines set forth by Fannie Mae and Freddie Mac. This loan requires mortgage insurance if the down payment is less than 20 percent. A conventional loan is a good option for those who have more money for down payments and better credit scores.

  • Debt to income ratio up to 45 %
  • As low as 3% down
  • If down payment is less than 20% it requires monthly mortgage insurance
  • Loan amount can be up to $417,000
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FHA Loan

The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), which is a department of the federal government. FHA loans are available to all types of borrowers, not just first-time buyers. The government insures the lender against losses that might result from borrower default. Advantage: This program allows you to make a down payment as low as 3.5% of the purchase price. Disadvantage: You’ll have to pay for mortgage insurance, which will increase the size of your monthly payments.

  • As low as 3.5% down
  • Debt to income ratio up to 55%
  • Requires monthly mortgage insurance
  • Allows for no cost “streamline” refinancing
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VA Loan

The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. This means the VA will reimburse the lender for any losses that may resultfrom borrower default. The primary advantage of this program (and it’s a big one) is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever.

  • Only available to qualified veterans
  • No down payment
  • No monthly mortgage insurance
  • Allows no cost “streamline” refinancing
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USDA / RHS Loan

The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements. The program is managed by the Rural Housing Service (RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to “rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.”

  • No down payment required
  • Only available for specific rural areas
  • Financing up to 103.5% of the appraised value
  • Requires monthly mortgage insurance
  • Maximum income limits
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Reverse Mortgage

A HECM Reverse Mortgage is an FHA insured loan. This loan allows those who are 62 years of age or older to use equity in their home for other purposes. Borrowers need at least 40-50% equity in their home to qualify.

  • No repayment is required as long as primary residence. The borrower will be responsible for paying taxes, insurance and compliance with all other terms of the loan.
  • Available to seniors 62 and older who qualify.
  • No out of pocket expense
  • Those who qualify can receive cash, monthly income, or a line of credit
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203K Rehabilitation Mortgage

Homeowners to finance the cost of repair work to improve/renovate/rehabilitate their primary residence into their mortgage. FHA program requires the property to be a primary residence of the borrower. A standard 203k loan program allows a loan amount that is 110% of the after improvement value determined by the appraisal.

  • Home must be at least a year old
  • Home must be a residential dwelling
  • Standard 203K cost of rehabilitation at least $5,000 and above
  • Streamline (mini) program can be used for repairs that cost less than $35,000
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Loan Features:

Fixed Rate

Your rate is fixed and does not change for the life of your loan. A fixed rate will guarantee that your payments will be the same each month for the duration of the loan

ARM (Adjustable Rate Mortgage)

Your rate will be fixed for a short period at the beginning of your loan, after which the rate will become adjustable and will adjust every 3-12 months according to the market. You and your loan officer will decide the terms of your ARM loan before you close, so you’ll know how often your rate will adjust.

Interest Only

You pay only on the interest, and not on the principle. Your interest only period will last anywhere from 2-15 years. After the interest only period is up, your loan becomes fully amortizing, which means your principle and interest will be divided into equal payments for the duration of the loan.

Combo Loan

Two loans that close simultaneously. If you’re looking for a loan over 80% LTV (loan-to-value), chances are your loan officer will suggest going with a 1 st and a 2 nd mortgage. This is to avoid mortgage insurance, which lenders generally require on any loan over 80% LTV.

Balloon Payment

Most lenders will give you a lower rate for making equal payments for part of a loan and one big payment at the end of the loan. The most common is called a 30/15 – the loan is amortized over 30 years, but called due in 15 years. Balloon mortgages are made with the assumption that the borrower plans to sell or refinance the property before the mortgage iscalled due. One disadvantage to the balloon payment option is that you may be required to sell or refinance in a less-than-ideal market.

Pre-payment Penalties

Lenders will offer lower rates in exchange for a pre-payment penalty, which can be “soft” or “hard” and last from 1 to 3 years. A “soft” pre-payment penalty means that you can sell your home with no consequences. However, if you try to refinance, you will be charged an amount that has been agreed upon. A “hard” pre-payment penalty requires that you pay the fee whether you refinance or sell your home.

NMLS# 3152

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These materials are not from HUD or FHA and were not approved by HUD or a government agency.

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