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Loan
programs come in many forms and come from many sources.
Just as the loan structure, like a 30 year fixed rate
mortgage, can affect your interest rate and monthly payments,
the source of funding for your loan can also affect your
rate and payments. The source of funding can also affect
the amount of your down payment and closing costs.
 If you have at least 3% of the loan amount to use as a
down payment, you may consider the most common type of
loan, a conventional loan. These loans consist of conforming
loans, which are secured by government sponsored entities
(GSE’s) such as Fannie Mae and Freddie Mac, and
jumbo loans, which are funded by private investors for
loan amounts higher than the limits set by the GSE’s.
Conforming loans are funded by Fannie Mae (FNMA) and Freddie
Mac (FHLMC). These companies do not lend money directly
to you, but work with lenders across the country to offer
mortgage loans to meet your needs. As a secondary market
for mortgage loans, they purchase mortgages from lenders
and package them into securities that can be sold to investors.
If you are looking for a large loan amount to purchase
or refinance your home, you could consider a jumbo loan,
which has a higher loan amount limit than the limits set
by Fannie Mae and Freddie Mac. Because jumbo loans cannot
be funded by these two agencies, they usually carry a
higher interest rate.
The federal government and other state, local and private
entities have developed programs to help you purchase
a home with a low down payment. If you are a first time
home-buyer or have low to moderate income, you may be
eligible for a mortgage insured by the Department of Housing
and Urban Development (HUD) through the Federal Housing
Administration (FHA). While FHA does not make or buy loans,
they insure FHA loans so that if you default on the loan,
the lender will get reimbursed. You may be able to get
an FHA loan with a low down payment of only 3% of the
loan amount or less. While there are limits to the size
of FHA loans, they are generous enough to handle moderately-priced
homes almost anywhere in the country.
If you are a veteran or qualify by military service or
other entitlements, FHA mortgage insurance can also be
combined with a guarantee from the Veteran's Administration.
VA mortgages were created to help veterans achieve the
American dream and buy their own homes. VA loans offer
low to no down payments with many of the same benefits
as an FHA loan.
If you have bad credit, you may not qualify for a conventional
loan. In this case, you could consider a sub-prime loan.
Like other loans, sub-prime loans come in many forms based
on the terms, loan amount and loan-to-value ratio you
are looking for. In addition companies will look at your
credit and give you a credit grade, which will help them
determine the best loan for your situation. With less-than-perfect
credit, you can expect to pay higher interest rates because
of the higher risk associated with making a loan to someone
with a poor credit history.
Loan Programs Explained
Click on a mortgage program below to view a complete description of that program. If you have any further questions or would like more information on how to begin one of these programs please contact us.
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