Types of Loans
Conforming Conventional Loans
A loan that conforms to conditions and terms of the government-sponsored enterprises Fannie Mae and Freddie Mac is called a conforming conventional loan, while one that does not is called a non-conforming conventional loan. The down payment of a conventional loan is generally higher than that of a government-insured loan, such as an FHA loan, which is 3.5 percent. Conventional borrowers generally must pay between 5 and 20 percent of the properties purchase price for a down payment.
FHA offers several types of loan programs to individuals. The 203(b) insurance program insures loans for purchase or fund of a principal residence. Approved lenders issue the funds. The 203(k) program insures loans on a purchase of a house that needs repairs. This type of loan includes the cost of the property plus the cost of making the repairs. In addition, FHA offers the Energy Efficient Mortgage Program (EEM). This program insures loans for individuals looking to purchase their primary residence and roll the cost of energy efficient upgrades into the the loan. The FHA loan program offers borrowers many benefits. As of January 1, 2009, FHA loans require a 3.5 percent down payment. You can receive the down payment as a gift to you from family members or obtain it from other sources such as down payment assistance programs. In addition, the credit and income guidelines are more relaxed on an FHA loan. The program also limits the amount of closing costs you are required to pay.
A loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain property financing. The Department of Veterans Affairs does not directly originate VA loans; instead, they establish the rules for those who may qualify, dictate the terms offered and insure VA loans against default. VA loans offer up to 100% financing on the value of a house. To qualify for a VA loan, borrowers must present a certificate of eligibility, which establishes their record of military service, to the lender. VA loans, FHA loans and other loans insured by departments of the United States government are securitized by the Government National Mortgage Association (Ginnie Mae). These securities carry the guarantee against default of the United States government.
A jumbo loan is a loan that is above the limits set by the government, also referred to as a non-conforming loan. The cost of a jumbo loan is higher than a standard loan, so expect a higher interest rate for a jumbo loan. The place must also be located in a higher-cost area, which is a neighborhood that can support a higher rate. Approval of a jumbo loan will not occur if the cost of the rest of the area is within conforming loan limits. The entire area must support the cost of the loan. A jumbo loan can be used to purchase single-family and multi-unit dwellings up to four units. You can also use a jumbo loan on a second house. A jumbo loan may have a fixed or an adjustable interest rate. A jumbo loan is for the purchase of an existing property or the construction of a custom place, including investment property. Check with your institution for other eligibility requirements and down payment information.
The United States Department of Agriculture (USDA) Guaranteed Rural Housing (GRH) offers a 100% financing property loan program – meaning zero down payment required! There are certain specific requirements for his loan program, both for the borrower and for the location of the property. The borrower must meet certain income restrictions, and they must plan to occupy the property. The borrower’s income cannot be above 115% of the U.S. median income for the area, adjusted by family size. Best of all, you do not need to be a first-time property owner.
Benefits of a USDA Guaranteed Rural Housing loan program:
- No first-time homebuyer requirements
- Eligible in rural areas with a population of 20,000 or less*
- 102% loan-to-value financing (2% up-front Guarantee Fee included)
- Annual fee of 0.40%* of the unpaid principle balance will be included in monthly payment
- Fixed rate loan
- No financial reserve requirements
- Owner occupied residence only
- Income limitations vary per applicable city or area (Cannot be above 115% of the U.S. median income for the area, adjusted by family size.)
- Seller can contribute up to 6% of the sales price towards buyer’s closing costs
- 100% gift funds allowed from family member
As the cost of living continues to rise, seniors are increasingly utilizing the reverse loans to help them achieve financial independence in their golden years. A Reverse loan is a federally insured financial tool that offers property owners aged 62 and older the ability to convert some of their equity into a supplemental cash flow. It can help provide financial security while guaranteeing that you continue to own your house – without giving up title, or making monthly payments. Best of all, there are minimal income and credit requirements, and you can use the money without any limitations.
Recent changes by Congress to the FHA-insured Reverse loan program have now made it possible for seniors to buy a place with this loan – to be closer to family, to switch to a single story or smaller house, or to move into an active adult community.
Graystone Mortgage, LLC is a preferred lender for The Utah Housing Corporation. UHC Loan Programs offer loans to qualified first time property owners and homebuyers who have previously owned a place. UHC provides down payment and closing cost assistance helping those who are buying a house without the required funds to purchase a place.
Working with Scott Seare was an enjoyable, no hassle experience!John