FHA Loans-Federal Housing Adiminstration
A government backed loan for borrowers with small down payments and perhaps lower credit scores. They are insured with both an upfront mortgage insurance charge and a monthly. Most any house can qualify but condominium buildings need to be approved in their entirety.
VA Loan-Veterans Administration
The have the best qualities of an FHA loan without the mortgage insurance. You can put down 0% and not have to pay mortgage insurance.
Conforming or Conventional Loans
– Loans purchased by Fannie Mae or Freddie Mac. These are the most common home loans and capped at $424,100. Most lenders including large national banks sell their mortgages to Fannie Mae or Freddie Mac. Fannie & Freddie create uniform underwriting guidelines and promise to back and or purchase qualifying loans from banks so they can stay liquid to lend more next month. They usually have the best rates but require strong scores and down payments. They are a commodity since the underwriting guidelines are the same for every lender nationwide. If you don’t fall within their guidelines it can be difficult to secure a mortgage.
Jumbo or Portfolio Loan
These are loans that a lender will not sell to Fannie Mae or Freddie Mac. It might be because the loan amount is over their $424,100 limit or it could be more complicated. The lender sets their own standard to perhaps keep these on in house or in their Portfolio. Usually these loans have the highest standards for down payment and credit score. Not only that but their rates tend to be higher than conforming.
LOW DOWN PAYMENT PROGRAMS
Self-employed borrower loans can be tricky. Income cannot be determined by simple pay stubs. Usually it take 2 years of complete tax return analysis for the business and individual to calculate ones’ ability to pay. An understanding of deductions and depreciation is need in order to not short change the applicant.
Zero Closing Cost Loans
Not everyone can offer a true no closing cost loan. Do not confuse no cost loans to ones in which you do not have to bring and cash to close. They are independent. As brokers our compensation is fixed with each lender. So we have no incentive to give you a higher rate or switch you to a different program. The fixed compensation has an additional benefit. Most lenders get paid more the higher rate they give you. If you work with a broker you can select a higher rate and the extra funds go to you and your closing costs instead of us. We will give you the option. A quick analysis of payment savings vs credit can be done so you select the best loan for your needs. If you are having a tough time deciding if it makes sense to refinance always try running the #’s with zero closing cost. No more saving vs. expense ROI debate.
Fixed 2nd Mortgage
These loans sit behind your primary loan in the lien position. That means when you home is sold they do not receive a penny until the lien ahead of them is satisfied. They are considered higher risk than the primary mortgage for this reason and come with higher rates. These are typically taken out at the same time your first buy the home. It is a way to put down a smaller down payment and still do a conforming loan. You can do a conforming for 80% of value and the HELOC for say maybe 10%. That way you only have to come up with 10% down and get a conforming loan without mortgage insurance.
HELOC-Home Equity Line of Credit
These are also considered 2nd mortgages. These are like a credit cards secured against your home. They are tax deductible and a good way to access equity in your home. Like a credit card they only charge you interest on what you borrow. You typically get a check book or ATM card to access the funds. You can pay it off and keep it open for future use. They also can be taken out when you first purchase a home but most are used as needed for home improvement or any other cash need.