A conventional loan is not guaranteed or insured by any type of government program. Veterans Administration (VA) loans and Federal Housing Administration (FHA) loans are loans guaranteed by or insured by the government.
Fannie Mae is the Federal National Mortgage Association (FNMA) and Freddie Mac is the Home Loan Mortgage Corporation (FHLMC) both are federally chartered corporations that buy and pool US mortgages and issue securities based on those pools. These entities are private, shareholder-owned companies created by Congress to bolster the housing industry by adding liquidity to the mortgage market when it purchases loans from lenders who use the funds received to make additional loans.
A conventional or conforming adheres to the rules and guidelines that have been set up by Fannie Mae and Freddie Mac. Mortgage banks fund loans that meet their guidelines and prepare them to be sold in bulk on the open market. Guidelines for these types of loans change periodically to ensure investors are protected from unqualified mortgage loans. The maximum loan amount for a conforming loan is $424,100. Conventional loans have a minimum down payment requirement of 3% in special circumstances, 5% in the standard down payment requirement. All loans with less than 20% down payment or equity will require some sort of private mortgage insurance whether as a part of the interest rate or a monthly portion of your payment as a way to protect the lender against default. Conventional credit requirements are normally more stringent than government guaranteed programs.
Loans insured by the Federal Housing Administration (FHA) are a type of federal assistance that allows for people to purchase homes with less stringent lending and down payment requirements. Created by the National Housing Act of 1934, FHA requires only a 3.5% down payment.
FHA loans will have an upfront as well as a monthly mortgage insurance premium for the life of the loan. Credit requirements for FHA are generally more liberal than conventional loans. FHA loan amount maximums are determined by the county the property is located in.
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans were designed to offer long-term financing to eligible American veterans or their surviving spouses. The VA direct home loan program supplies home financing to eligible veterans with no down payment.
VA loans have more liberal loan guidelines very similar to FHA loans. VA loans do not have monthly mortgage insurance. The maximum VA loan guarantee varies by county. The maximum VA loan amount with no down payment is usually $424,100, although this amount may rise in certain specified “high-cost” counties.
The United States Department of Agriculture (USDA) offers qualified applicants zero down payment loans in approved rural areas. Unlike other government mortgage loans, the USDA program does not require borrowers to make a down payment. In addition, closing costs can be rolled into the loan, completely eliminating the upfront costs of buying a home. USDA mortgage holders are not required to carry traditional mortgage insurance. A USDA mortgage loan can be used to buy, construct or rehabilitate a home.
Loans that exceed the conventional loan limits of $510,400 are considered Jumbo loans. These loan have additional layers of risk and can take additional information in order to approve. Larger down payment requirements as well as more stringent underwriting guidelines can extend the amount of time required to complete Jumbo loans as well.
Borrowers interested in Jumbo loans are required to have credit scores higher than 700 and higher reserves than standard conventional loans. Properties exceeding $1,000,000 can also require more than one appraisal to be completed as well as multiple layers of review.
As homeowners grow older the decision to stay in their home can be a very important one. A Reverse Mortgage can be an option for homeowners who want to stay in their home and tap the stored value of the home. Reverse Mortgages can convert some of that equity into cash or eliminate the monthly payment to allow owners to stay in their homes.
Contact Plum Creek to discuss if a Reverse Mortgage is a good option for you and your family.
Once you own the home of your dreams it is important to know all of the facts. Refinancing can help home owners in several areas of their financial and investment goals. Lower your rate or pay off debt we can help you with any refinance. Contact us to perform a mortgage checkup and make sure your current loan is the best solution for you.
LOWER INTEREST RATE
SHORTER MORTGAGE TERMS
2ND MORTGAGES / HELOC
Contact Plum Creek to review your current mortgage situation. We are able to provide you with the most recent market news to help you make an educated decision regarding your current mortgage. Never pay more than you should for your home. Call 303-840-0966 for immediate help.