Conventional Loans

Conventional Loans are basically any mortgage which is not guaranteed or insured by the US Government. These are traditional home loans made by lenders and held by lenders and other financial institutions. Qualification requirements for conventional loans and the types of borrowing scenarios they support may provide more flexibility to borrowers which may mean more borrowing options or terms better suited to the situation. Typically, though Conventional Loans require a larger down payment for home purchases.

Some of the key advantages of the Conventional Loan are:

• Lower market interest rates may be available depending on the specific program
• Seller contributions are allowed
• More flexible underwriting (more creative financing options)
• May finance vacation/second homes
• May finance investment properties
• Lenders may be willing to reduce or eliminate certain loan fees
• Appraisals may not be as strict as with the FHA or VA required appraisals
• Private Mortgage Insurance (PMI) may be available which allows a lower down payment

The loan amount for "Conforming Loans", which conform to the guidelines set by Fannie Mae and Freddie Mac, is $417,000 for Single Family residences (there are exception for Alaska and Hawaii), although much more can be borrowed with Conventional Loans. Conforming Loans typically give the borrower the best rates and terms. Refer to our Jumbo Loans page for more information on high balance conventional loans.

Contact Us for more information on Conventional Loans.

Jumbo Loans

Jumbo Loans in this context are any mortgage which is not guaranteed or insured by the US Government which has a loan balance over the Conforming Loan Limit set by Fannie Mae and Freddie Mac. Currently the conforming limit is $417,000 for a Single Family unit with exceptions in Alaska and Hawaii. There is no set maximum loan amount, that may vary from lender to lender, but it is not uncommon to see loan amounts in the millions. This may be the only means for some homebuyers to acquire a higher priced home.

Because of the larger loan amount the risk associated with the loan increases and therefore down payment requirements are usually set higher than other loans to mitigate that risk. Jumbo loans also may have a higher interest rate compared to a similarly structured Conforming Loan.

Some of the key advantages of the Jumbo Loan are:

• Much higher loan balances may be available
• Flexible underwriting (more creative financing options)
• May finance vacation/second homes
• Financing may be available for certain investment properties
• Lenders may be willing to reduce or eliminate certain loan fees

Contact Us for more information on Jumbo Loans.

FHA Loans

FHA loans are designed to help creditworthy lower-income and moderate income individuals and families to buy a home. These loans are beneficial to those borrowers that wish to put a minimum amount of down payment on the home. This program also has a little more flexibility in terms of borrower qualifications.

Some of the advantages of the FHA loan are:

• Low down payment (only 3.5% may be required)
• Down payment may also be in the form of a qualified
  Down Payment Assistance program or bona fide gift
• Seller contributions are allowed
• More flexible underwriting (approval)
• Closing costs that lenders can charge are restricted
• FHA loans are "assumable" to other qualified buyers
• FHA Refinances can be streamlined (less documentation required for approval)
• Some closing costs may be financed (less out of pocket expenses)
• Some FHA loans allow for Energy Efficiency credits
• Some FHA loans can allocate costs for repair/upgrade within the loan
• The FHA loan is covered by a government loan insurance program which
  makes it more desirable for lenders and other institutions

Contact Us for more information on FHA Loans.

VA Loans

VA guaranteed loans are made by lenders and guaranteed against payment default by the US Government. The Government created the VA loan program as a benefit for those who served in the Armed Forces. The biggest advantage of the VA Loan program is that the borrower can purchase a home with zero down.

Some of the key advantages of the VA loan are:

• Low to no down payment
• Seller contributions are allowed
• More flexible underwriting (approval)
• Closing costs that lenders can charge are restricted (e.g. Loan Origination Fee cannot exceed 1%)
• The VA Funding Fee is waived if the veteran is determined to be "disabled"
• VA loans are "assumable" to other qualified buyers
• VA Refinances can be streamlined (less documentation required for approval)
• Some closing costs may be financed (less out of pocket expenses)
• The VA loan is guaranteed by the US Government which makes it more desirable for lenders and other institutions

The US Government does not set a limit on the amount of money a veteran can borrow under this program. However since the loan guarantee is limited most lenders have limits on how much can be borrowed and where there is a down payment requirement on higher loan amount.

The veteran must be able to provide a Certificate of Eligibility from the VA to qualify for the loan.

Contact Us for more information on VA loans.

USDA Loans

USDA loans are designed to help creditworthy lower and moderate income individuals and families to buy a home in a rural designated area. These loans are beneficial to those borrowers that wish to by a home with no money down. Many people think of rural home being farms way out in the country. But a lot of people are surprised when they find that a property within close driving distance is actually considered rural according to the USDA.

Some of the advantages of the USDA Rural loan are:

• No down payment
• Bona fide gifts allowed
• Seller contributions allowed
• Closing costs that lenders can charge are restricted (e.g. Loan Origination Fee cannot exceed 1%)
• Some closing costs (including the USDA Fee) may be financed (less out of pocket expenses)
• No monthly mortgage insurance (MIP)
• Non-purchasing spouse allowed
• Borrower allowed to borrow closing costs on an unsecured basis

Contact Us for more information on USDA Loans.

Reverse Mortgage Loans

Reverse Mortgages are designed to enable elderly homeowners to access their equity without having to sell their home or move. The borrower can receive a lump sum, a fixed monthly payment or a line of credit to draw from. There is no repayment until the borrower sells the property or passes away. While the vast majority of Reverse Mortgage loans are refinances, this loan program can also be used to buy a home.

There are no credit or income qualifying factors with this loan program. The primary requirements are that the borrower(s) be at least 62 years of age, have a low or zero balance owed against their home and occupy the property as their primary residence. A Reverse Mortgage requires counseling by an independent HUD approved HECM counselor so the borrower is rest assured they understand how the program will benefit them.

Some of the advantages of the Reverse Mortgage loan are:

• No Credit or Income Qualifications needed
• Can be used to pay off existing monthly debts such as mortgages,
  car payments, medical bills, etc.
• Can be used to create a tax-free income stream
• Can be taken as a single lump sum
• Can be created as a Line of Credit that is there when needed
• Does not need to be paid back unless the home is sold or the borrower(s) pass away

Most of the Reverse Mortgages in use today are covered by FHA under their HECM program. The current HECM loan limit is $625,000.

The Federal Housing Administration (FHA) is a division of Housing and Urban Development (HUD).

Contact Us for more information on Reverse Mortgage Loans.