Program Descriptions

Most loan programs contain different features that can be confusing for even experienced homeowners. The most common loan programs include:

FHA Loans | VA Loans | Conforming | Jumbo | Second Mortgages | Equity Lines | Rural Development

Federal Housing Administration (FHA)

The Federal Housing Administration is a division of the U.S. Department of Housing and Urban Development, commonly referred to as HUD. FHA loans were created to provide affordable mortgages to the average homebuyer. The federal government insures FHA loans, or guarantees participating lending institutions against loss from default on qualifying loans.

Programs and Features:

  • Fixed Rate Loans, Temporary Buy-Downs and ARMS
  • Available for detached 1 to 4 unit dwellings, eligible condos and PUD's
  • Properties must meet HUD guidelines and be inspected by HUD-approved appraisers
  • Subject to loan limits set by HUD (see HUD web site for loan limits)
  • Mortgage insurance of 1% to 1.15% based on LTV, due annually and paid monthly
  • One time mortgage insurance fee of 1% charged on detached dwellings and PUD's, which may be financed
  • Non-occupant co-borrowers allowed
  • No reserve requirements at closing
  • 100% of down payment and closing costs may be a "gift"
  • Fully assumable by a qualified borrower
  • Seller may contribute a maximum of 6% of the lower of the sales price or the appraised value

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Veterans Administration (VA)

Veterans Administration loans were created to help veterans finance the purchase of their homes with favorable loan terms. For the purpose of the VA program, "veteran" includes active duty service personnel and certain categories of spouses. Like FHA loans, the federal government insures VA loans, or guarantees VA approved lending institutions against loss from default on qualifying loans.

Programs and Features:

  • Fixed Rate Loans and Temporary Buy-downs
  • Available for detached 1-unit dwellings, eligible condos and PUD's
  • Properties must meet VA guidelines and be inspected by VA-approved appraisers
  • Subject to loan limit set by VA. Contact us for current limits in your area.
  • One time mortgage insurance fee is typically charged, which may be financed if the total loan amount does not exceed the loan limits set by VA.
  • No prepayment penalty
  • No reserve requirements at closing
  • No down payment required
  • Out-of-pocket expenses may be gifted, typically from relatives
  • Only eligible veterans and their spouses occupying the subject property may be co-borrowers or co-signers
  • Seller may contribute a maximum of 6% of the lower of the sales price or the appraised value

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Conforming Loans

Conforming Loans are those that meet Fannie Mae and or Freddie Mac underwriting requirements. In other words, income, credit, and property requirements must meet nationally standardized guidelines. Conforming loans are subject to loan amount limits that are set by Fannie Mae (FNMA) and Freddie Mac (FHLMC). These limits vary based on the region in which the subject property is located as well as the number of legal units contained in the subject property.

  48 States Hawaii & Alaska
1 unit property $417,000 $625,500
2 unit property $533,850 $800,775
3 unit properties $645,300 $967,950
4 unit properties $801,950 $1,202,925

Under the FNMA and FHLMC Charter Acts, the loan limits are 50% higher for first mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

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Jumbo and Non Conforming Loans

Jumbo loans are those that exceed the loan amounts allowed by FNMA and FHLMC.

Programs:

  • No Income/No Asset Verification Loans
  • ARMs
  • Fixed Rates
  • Credit History Less than perfect
  • Options Available

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Second Mortgages or Home Equity Closed-End Loans

A close-ended loan is one where a set amount of money is borrowed and repaid within a specific period of time. There are a multitude of second mortgage products available and lender guidelines vary widely. Generally, loan amounts, interest rates and fees are tied closely to equity in the property and credit scores. Whether to do a first or second mortgage or whether to take a line of credit or closed-end loan depends largely on the purpose of the loan.

Second mortgages are ideal products for the following situations:

  • Debt Consolidation: This is the most common purpose for acquiring a second mortgage. Typically, a second mortgage is paid off in a shorter period of time than a first.
  • Home Improvements: The greater the equity in a property, the better the deal on a mortgage. Often, a borrower will take second mortgage to complete improvement projects. After the improvements are completed, the borrower refinances the first mortgage.
  • Cash Out: Many borrowers use the equity in their properties to obtain cash to pay for college expenses, vacations, or any other purpose that requires a fairly sizable amount of cash.
  • Eliminate the requirement for Mortgage Insurance.

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Home Equity Lines of Credit

A home equity line of credit loan is a line of credit that is secured against real estate. The amount of the credit line is dependent upon the amount of equity in the subject property and the lender's guidelines. Each lender has its own specific guidelines and limitations. Lines of credit are typically designed for borrowers who intend to pay back the borrowed funds within a short period of time. Equity lines of credit are processed and underwritten similar to traditional mortgages; however, lender guidelines vary widely.

Home equity lines differ from traditional mortgages that provide funds up front, then require repayments of principal and interest each month. With a home equity line, a borrower may draw against any available credit on the line while continuing to make monthly payments during the "draw period." The draw period usually lasts 15 years. At the end of that time, the borrower has a set number of years to repay the remaining balance in full without further draws. The "repayment period" is typically 15 years.

Interest on home equity lines accrues similar to interest on credit cards and payments are based on payment factors.

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Rural Development

A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan that is different from a traditional mortgage in several ways.
  1. USDA loans require no down payment, you may finance up to 100% of the property value.
  2. You must meet the income restrictions for the County you are interested in. Each county has a maximum Income Requirement. The USDA Home Loan Program does allow for considerations for expenses like Child Care.
Eligibility
  1. To be eligible, you must be purchasing a property in a rural area as defined by the USDA.
  2. The home or property that you are looking to purchase must be owner-occupied; investment properties are not eligible for USDA loans.

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