Types of Loans
What types of loans are available to me? There are many different types of mortgage offered to consumers. Some of the most popular mortgage broker are the FHA Home Loan (Federal Housing Administration) and the VA Loan . Because the FHA mortgage and VA mortgage are guaranteed by the government, borrowers are able to make a smaller down payment, and take advantage of more relaxed credit and asset requirements than traditional conventional loans.. Details about the major types of loans, including FHA mortgage and VA mortgages, follow.
Conventional loans generally are considered loans with loan amounts at or under the maximum loan amount available for purchase by Freddie Mac or Mannie Mae.
Fannie Mae is the common name of the Federal National Mortgage Association. Fannie Mae is a congressional chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary home mortgage market. Before approving you, Fannie Mae looks at a number of factors including credit ratings, debt ratio, and employment history.
Freddie Mac Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation. The 2006 maximum loan amount for both Fannie Mae Mortgage and Freddie Mac company is $417,000. Freddie Mac does not issue mortgages directly, rather, they buy mortgages from lenders and resell them as securities on the secondary mortgage market. Before approving you, Freddie Mac looks at a number of different factors including credit ratings, debt ratio, and employment history.
Government guaranteed loans. FHA, VA loans.
An FHA mortgage (Federal Housing Administration) has some advantages over conventional mortgage. Since FHA Mortgage are insured by the government, they generally have more lenient qualification and requirements, lower down-payment requirements, and they may be assumable. The maximum mortgage amount for an FHA mortgage varies depending on the city where you live. As your mortgage broker on what these maximum amounts are for your specific city. FHA loans are very popular with first time buyers. They also make great sense if you are buying a multi family property to live in and want to get maximum financing. Mortgage insurance on an FHA loan is the same no matter what loan to value your loan is, something that is not the case with a conventional loan. High LTV’s pay a far greater insurance payment.
A VA (Veterans Affairs) mortgage carries many of the same advantages as an FHA home mortgage. However, to qualify for this mortgage, you must be a qualifying veteran, the unmarried widow of a veteran, or an active-duty serviceman. Talk with your mortgage broker on maximum loan limits, required down payments (if any) and what your funding fee will be. VA loans do not have a mortgage insurance payment, instead borrowers pay a one time fee for their “insurance” What percent of the loan amount varies, currently it will not exceed 4%. These are different than origination or discount points.
Non-Conforming / Jumbo mortgage are loans where the loan amount is greater than the conforming loan limit. $359,650 currently for a single family. So if you need to borrow $500,000 to purchase your new home, it will be a jumbo loan. Jumbo loans typically have interest rates slightly higher than conforming loans, about 1/2 percent higher. If you will be borrowing this much money you should ask your broker if you could split up your loan into a 1st. and a 2nd. mortgage to avoid needing a jumbo loan and avoid the increase interest cost.
A mortgage broker can help you find the best rate and product to fit your situation. Ask them about what are your options.