Loan Options
FHA Loan
What Is a Federal Housing Administration (FHA) Loan?
A Federal Housing Administration (FHA) loan is a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than is usually required. The FHA loan is designed to help low-to moderate-income families attain homeownership. They are particularly popular with first-time homebuyers.
KEY REQUIREMENTS
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Borrower must be a resident of the United States, with a valid Social Security number
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Borrowers must be old enough to sign a mortgage in their state
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Borrower must have a steady source of income, with a 2 year verifiable work history
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Borrowers must have a manageable level of debt and meet debt-to-income ratio requirements (Front-end 36%, Back-end 43%) Lenders may adjust DTI requirements to for with compensating factors
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3.5 % down payment for borrowers with a 580 credit score or higher, lower scores will require a higher down-payment
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You can buy a single-family home, 2 to 4-unit multifamily home, condo, townhouse, manufactured home, or even a fixer-upper with an FHA loan. However, homes purchased with an FHA mortgage must be used as primary residences, not for investment or business purposes.
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Conventional Loan
What Is a Conventional Mortgage or Loan?
A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. However, some conventional mortgages can be guaranteed by two government-sponsored enterprises; the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).1
KEY REQUIREMENTS
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The borrower must be a resident of the United States, with a valid Social Security number
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Borrowers must be old enough to sign a mortgage in their state
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A minimum credit score of 620
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A debt–to–income ratio lower than 43%
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It’s a common myth that you need a 20% down payment for a conventional loan; you can actually get one with as little as 3% down. There are six major mortgage options for a conventional loan down payment requirements, ranging from 3% to 20%
These types of conventional loans include:
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Conventional 97 loan – 3% down
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Fannie Mae Home Ready loan – 3% down
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Freddie Mac Home Possible loan – 3% down
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Conventional loan with PMI – 5% down
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Piggyback loan (no PMI) – 10% down
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Conventional loan without PMI – 20% down.
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Jumbo Loan
What Is a Jumbo Mortgage or Loan?
A jumbo loan is designed for expensive, higher-end properties that exceed the loan limits of a conventional loan. The conforming loan limit is set each year by the Federal Housing Finance Agency (FHFA), with most of the U.S. limited to $647,200 for the conventional home loan. When you exceed these amounts, you are now entering jumbo mortgage territory. If you want to buy a house that’s more expensive than normal, a jumbo loan can help you get the financing you need. Jumbo loans aren’t just used to buy a primary residence; this type of loan is also a popular choice for investment properties and vacation homes.
KEY REQUIREMENTS
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Higher credit scores. Many lenders require a FICO® Score☉ of 720 or better for many jumbo loans.
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Larger down payments. Jumbo loan issuers typically require down payments of 20% or even as high as 30%.
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Greater cash flow. Mortgage lenders typically look for a debt-to-income (DTI) ratio of no more than 36% when issuing jumbo mortgage loans.
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Additional assets. As a safeguard against the possibility of missed payments on jumbo loans, lenders often require applicants to prove they have access to savings or other liquid assets sufficient to cover as much as one year of loan payments.
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Higher interest rates.
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Additional appraisals.
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Higher closing costs.
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Refinance Loan
What Is a Refinance Mortgage or Loan?
A refinance, or "refi" for short, refers to the process of revising and replacing the terms of an existing credit agreement, usually as it relates to a loan or mortgage. When a business or an individual decides to refinance a credit obligation, they effectively seek to make favorable changes to their interest rate, payment schedule, and/or other terms outlined in their contract. If approved, the borrower gets a new contract that takes the place of the original agreement.
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KEY REQUIREMENTS
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Your current mortgage must be in good standing: If you’ve skipped any monthly mortgage payments, you’ll need to catch up before refinancing
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Your current loan might need to be "seasoned": Some lenders and loan programs impose a minimum waiting period to refinance after you buy a new home or after a previous refi. This period of time is generally six months, meaning six mortgage payments
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Your home equity must be sufficient: Typically, your home’s market value must exceed your mortgage balance by anywhere from 3% to 20%
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You need a decent credit score: The minimum credit score to refinance typically ranges from 580 to 680, depending on your lender and loan program
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Your debt-to-income ratio (DTI) can't be too high: If you’ve taken on a lot of credit card debt and other loans, your refinance may not be approved. Unless that is, you’re consolidating your debts with a cash-out refinance
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You need enough cash to close: There are ways around paying your refinance closing costs upfront. But you’ll have to pay the costs or refinance one way or another.
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VA Loan
What Is a VA Mortgage or Loan?
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs and issued by a private lender, such as a bank, credit union or mortgage company. A VA loan can make it easier to buy a home because it typically doesn't require a down payment.
KEY REQUIREMENTS
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Your length of service or service commitment, duty status, and character of service determine your eligibility for specific home loan benefits.
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No-down-payment required (*Note: Lenders may require down-payments for some borrowers using the VA home loan guaranty, but VA does not require a downpayment)
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Competitively low-interest rates
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Limited closing costs
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No need for Private Mortgage Insurance (PMI)
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The VA home loan is a lifetime benefit: you can use the guaranty multiple times.
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