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Types of Loans

Traditional Fixed Rate Mortgage 

The traditional fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

Conforming Loan

A mortgage loan that conforms to GSE (Fannie Mae and Freddie Mac) guidelines. The most well-known guidelines is the size of the loan, which as of 2013 was generally limited to $417,000 for single family homes in the continental US. Other guidelines include borrower's loan-to-value ratio (i.e. the size of down payment), debt-to-income ratio, credit score and history, documentation requirements, etc.

 

Jumbo Loans

A mortgage with loan amounts exceeding Freddie Mac and Fannie Mae's conforming loan limit. Jumbo loans are also called non-conforming loans. Jumbo loans are common for expensive or urban areas with higher home values. Jumbo loans offer similar product types to conforming loans, including fixed and adjustable rates at various terms, and even the government sponsored VA loan.

FHA Mortgage

A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage. FHA loan requirements are as stringent as the most discerning lender's. Many people are confused in thinking the FHA will guarantee a loan to an individual who would not otherwise meet lender requirements. In fact, the FHA needs to assure the borrower has a very low chance of default. Otherwise, the organization could be on the hook to repay the debt in full to the lender, losing money quickly. To get an FHA loan, you must have good credit, no overdue government debts and a stable income.

VA Mortgage

A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.  When you apply for a mortgage guaranteed by the VA, credit history plays an important part in the loan decision. The VA generally requires you to have paid your creditors on time for the past year. If you are in the process of repairing some credit problems, make sure to discuss your repayment plans with your lender, so they will know you have a willingness to repay your obligations.

Credit issues that you may need to address before you can obtain a loan approval may include the following: No established credit; late credit payment history, Chapter 7 or 13 Bankruptcy filing; Property foreclosure and other miscellaneous credit issues such as such as medical bills or any small debt accounts, that are presently in collection, usually you can qualify for a VA loan if you are working on resolving the matters. Any federal tax liens or judgments will need to be either in the process of resolution or paid in full before the VA will consider you for a mortgage loan.

USDA Loan

The USDA Loan is a perfect option for those who reside in rural areas, suburban areas and even suburbs of major metropolitan areas. Qualified rural area is defined as open country places, and homes in cities with populations of 10,000 or less. Under certain conditions, the home may be located in towns and cities of 10,000 to 20,000 in population. These guaranteed loans have assisted thousands of homeowners purchase a home with affordable interest rates and loan terms. With the USDA Loan, there are certain home loan qualifications that must be met for the home to be eligible. These qualifications include construction standards, income standards, cost limits and location designated eligible by the USDA.

Construction to permanent loan (CP)

This loan should be at the forefront of consideration if you are planning on building your home as an owner-builder. With some advanced planning you could save thousands of dollars by having your entire loan rolled into one package. A standard construction loan is typically a short-term loan and lasts and lasts until the property is fully completed. While only the interest is due during this period, if a second loan (i.e. mortgage) is required upon completion of construction, then you can expect all the closing fees to follow (e.g. loan origination, title insurance etc.). The construction to permanent loan is a simple means to ensure that you pay closing costs only once. Upon the completion of your home, the loan converts to a standard mortgage.               

Portfolio Loan

These are mortgage loans that are not sold on the secondary market. These lenders keep their loans in house, so they can profit from the interest. Since a portfolio lender does not sell their loans to another source, they can often provide you with more leeway on your mortgage.