CONVENTIONAL LOANS

Conventional loans are "conforming" if they are generally $417,000 or less for a single-family home. Conforming loan limits can be higher in pricier regions of the country. For example, in such states as Alaska and Hawaii, it's $625,500.

There are also established guidelines for borrower credit scores, income requirements and minimum down payments. For example, most conventional loans require somewhere between 5 percent and 20 percent down.

Right now those guidelines are changing frequently but they should have at least a 620 credit score.

Conventional loans can be conforming or nonconforming. Loans above the lending limits set by Fannie Mae and Freddie Mac are called nonconforming or jumbo loans.

Most conventional mortgages have either fixed or adjustable interest rates. Typical fixed interest rate loans have a term of 15 or 30 years. A shorter-term loan usually results in a lower interest rate. Adjustable-rate mortgages, or ARMs, fluctuate in relation to the rate of a standard financial index, such as the LIBOR. Monthly payments can go up or down accordingly.

Pros: Conventional mortgages generally pose fewer bureaucratic hurdles than FHA or VA mortgages, which may take longer to process because of the red tape. And because these mortgages generally require higher down payments than the others, home equity can build up faster.

FHA MORTGAGE

A mortgage on which the lender is insured against loss by the Federal Housing Administration, with the borrower paying the mortgage insurance premium.

What FHA Does: By insuring lenders against loss in the event that borrowers default on their loans, FHA encourages lenders to make loans that they might otherwise view as too risky.

Who Should Take an FHA? FHA loans are for borrowers who can't meet a 5% down payment requirement and have poor credit. Borrowers who can put 10% or more down and have good credit will do better with a conventional loan. The best loan type for borrowers who fall in the middle depends on the specifics of the case.

The great appeal of the FHA program is that it allows 3.5% down. Private mortgage insurers, in contrast, require 5% down on most loans . FHA is also liberal in allowing gifts to be used for paying settlement costs.

FHA borrowers may also have weaker credit than private insurers accept. FHA allows higher ratios of expense to income, is more tolerant of existing debt and will allow the income of co-borrowers who don't live in the house to count fully in measuring income adequacy. It is also quite forgiving about bad credit. For example, a borrower need be out of a Chapter 7 bankruptcy for only two years and out of a Chapter 13 bankruptcy for only one year.

FHA Loans Are Assumable: Both FHA and VA loans have the advantage that they can be assumed by a qualified buyer. If a house is to be sold with an FHA mortgage carrying a rate well below the current market, the seller can enhance its marketability by allowing the buyer to assume the old mortgage. Conventional loans carry due-on-sale clauses that require the loan to be repaid when the house is sold..

FHA 203K LOAN

What Does FHA 203(k) Loan Mean?

A type of federally insured mortgage product for individuals who want to rehabilitate or repair a damaged home that will become their primary residence. In addition to the funds to cover the purchase price of the house, the FHA 203(k) loan provides the money needed for repairs and related expenses as part of the loan.

This loan has a low down payment requirement compared to private-sector mortgages and puts rehab projects within reach for individuals who otherwise could not afford them.


FHA's Streamline 203(k) Mortgage The "Streamline"(K) Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements.


What is the minimum amount of rehabilitation required for a non-streamlined Section 203(k) mortgage?

There is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement. Under the Streamlined 203(k) program, a minimum repair/improvement cost requirement is not applicable.


Does HUD always require a contingency reserve to cover unexpected cost increases?

Typically, yes. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required.

Can the borrower do their own work write up and cost estimate?

Yes, but only under the Streamline (k) program.

Is a contractor required to do the work?

No. However, if the borrower wants to do any work or be the general contractor, they must be qualified to do the work, and do it in a timely and workmanlike manner. It is very important that the work be done in a time frame that will assure the completion of the work that will be agreed upon in the Rehabilitation Loan Agreement (signed at closing). A borrower doing their own work can only be paid for the cost of the materials. Monies saved can be allocated to cost overruns or additional improvements.

Can a Section 203(k) mortgage be an Adjustable Rate Mortgage?

Yes. An Adjustable Rate Mortgage is available to an owner-occupant only. Investors and non-profits are not eligible for an ARM

REVERSE MORTGAGE/HECM LOAN

What is a Reverse Mortgage?

A Reverse Mortgage is a type of loan that allows homeowners age 62 and older to turn their home equity into cash, while still living in and owning their own home.

Do you need extra money for a single big expense, or just a little more money each month? With a Reverse Mortgage, you have the flexibility to choose how you want to be paid. You can choose a lump sum, a monthy payment, or even a line of credit.

Reverse Mortgages that conform to FHA guidelines are also called HECM loans - Home Equity Conversion Mortgages.


Borrower Requirements

You must:

• Be 62 years of age or older
• Own the property outright or have a small mortgage balance
• Occupy the property as your principal residence
• Not be delinquent on any federal debt
• Participate in a consumer information session given by an approved HECM counselor

Mortgage Amount Based On

• Age of the youngest borrower
• Current interest rate
• Lesser of appraised value or the HECM FHA mortgage limit or the sales price
• Initial Mortgage Insurance Premium (MIP)--your choices are HECM Standard or HECM SAVER initial MIP Financial Requirements
• No income or employment qualifications are required of the borrower
• No repayment as long as the property is your principal residence and the obligations of the mortgage are met
• Closing costs may be financed in the mortgage

Property Requirements

The following eligible property types must meet all FHA property standards and flood requirements:

• Single family home or 1-4 unit home with one unit occupied by the borrower
• HUD-approved condominium
• Manufactured home that meets FHA requirements

Repaying a HECM

A HECM loan must be repaid in full when you die or sell the home. The loan also becomes due and payable if:

• You do not pay property taxes or hazard insurance or violate other obligations.
• You permanently move to a new principal residence.
• You, or the last borrower, fail to live in the home for 12 months in a row. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home.
• You allow the property to deteriorate and do not make necessary repairs.

VA LOAN

Why a VA Loan?

It's simple ... Lower Rates. Lower Payments. $0 Down.
Find out why thousands of people are using their VA Loan benefit every single month. Allow us to help you lower your monthly payment, lower your interest rate and purchase a home with $0 down.

Purchase with $0 Down

A VA Loan is one of the only loan programs that still allows the borrower to finance 100% of the home's value and purchase with $0 down. Now more than ever banks are requiring large down payments for conventional loans. In many cases they require 10-20% down, putting home ownership out of reach for many prospective buyers.

How much will $0 down save you? Conventional loans will require a minimum of 5% down, and in many cases as much as 10% and 20%. The qualification guidelines are less stringent for VA Loans. Because the loan is backed by the government, banks have relaxed the often strict lending rules for VA Loan applicants making them easier to obtain.

Lower Your Monthly Payment

A VA Loan offers two benefits that will substantially lower your monthly payment. PMI, or private mortgage insurance is not required on a VA loan. PMI is an added monthly expense required for conventional loans where the borrower finances more than 80% of the home's value. Getting Qualified is Easier.