Home Loan Programs can be divided into categories in two
different ways. Firstly, conventional and government
loans. Secondly, all the various home loan programs may be classified as fixed rate loans, adjustable
rate loans and their combinations.
- FHA
Loans
- VA loans
- RHS
Loan Programs
- State
and Local Housing Programs
- Conforming Loans
- Jumbo
Loans
- B/C
Loans
Except VA, FHA, or and RHS loans, any home loan program is
conventional one.
FHA Loans
Part of the U.S.
Dept. of Housing and Urban Development (HUD), Federal Housing Administration
(FHA) home loan program administers various house loan programs.
When comparing
with conventional house loan programs, FHA loans have lower down payment
requirements and are easier to qualify. Statutory limit cannot be exceeded by FHA
loans.
FHA loans are programs to helping low income families become
homeowners. By protecting a mortgage company from default, they encourage
companies to make loans to families that many not meet normal credit
guidelines.
VA loans
U.S. Dept. of Veterans Affairs guarantees VA home loan
programs. By means of favorable loan terms, the guaranty allows veterans and
service persons to obtain home loans devoid of a down payment. In addition, it
is easier to qualify for a VA loan than a conventional loan. Lenders generally
limit the maximum VA loan to $203,000.
The U.S. Department of Veterans Affairs does not make loans,
it guarantees loans made by lenders. VA will issue you a certificate of
eligibility to be used in applying for a VA loan, if it determines your
eligibility and you are qualified.
For military veterans discharged under conditions other than
dishonorable, who are served on active duty are accessible for VA loans.
Veterans with service only during peacetime periods and
active duty military personnel must have had more than 180 day's active
service. There are other eligibility requirements. If you think you may be
eligible, contact your local or state veterans' administration representative.
RHS Loan Programs
With minimal closing costs and no down payment, the Rural
Housing Service (RHS) home loan program of the U.S. Dept. of Agriculture
guarantees loans for rural residents.
Ginnie Mae, which is part of HUD, guarantees securities
backed by pools of mortgage loans insured by these three federal agencies -
FHA, or VA, or RHS. By means of financial institutions, trade government
securities will be sold.
State and Local Housing Programs
Many states, counties and cities provide low to moderate home
loan programs, down payment assistance programs, or programs intended particularly
for a first time buyer. These programs are naturally more lenient on the
qualification guidelines and often designed with lower upfront fees.
Also, at the local or state level such as MCC (Mortgage
Credit Certificate) there are often loan assistance programs offered that
allows you a tax credit for part of your interest payment. Most of these
programs are fixed rate mortgages and have interest rates lower than the
current market.
Conforming Loans
Conventional home loan programs may be conforming and non-conforming. Conforming
loans have terms and conditions that follow the guidelines set forth by
Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac guidelines institute the maximum loan amount, borrower credit and income
requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac
announce new loan limits every year.
These two stockholder-owned corporations purchase home loan
programs fulfilling with the guidelines from mortgage lending institutions,
packages the mortgages into securities and sell the securities to investors.
By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae,
provide a continuous flow of affordable funds for home financing that result in
the availability of mortgage credit for Americans.
Jumbo Loans
Jumbo loans are the loans that are above the maximum loan
amount established by Fannie Mae and Freddie Mac. Jumbo Loans often have a
little higher interest rate than conforming since they are bought and sold on a
much smaller scale, but the spread between the two varies to the economy.
We invite you to take advantage of our database of the most
competitive lenders available if you are looking for a jumbo loan and need more
information or advice,. Just complete a short loan request form and the best
lenders in your local area will contact you with their rates and fees.
B/C Loans
Loans that do not meet the borrower credit requirements of
Fannie Mae and Freddie Mac are called 'B', 'C' and 'D' paper loans vs. 'A'
paper conforming loans. B/C loans are offered to borrowers that may have
recently filed for bankruptcy, foreclosure, or have had late payments on their
credit reports.
Their purpose is to offer temporary financing to these
applicants until they can qualify for conforming "A" financing. The
interest rates and programs vary, based upon many factors of the borrower's
financial situation and credit history.
If you were to choose this type of home loan program, you
would need to check what the current year's limits are for an accurate amount. There
are limits that are adjusted annually if needed based on the national average
of new homes.
Government-sponsored lenders secure conventional loans. They
are also known as government sponsored entities (GSE's). They can be used to
purchase or to refinance single family or four plex homes with a first or a
second mortgage.
Sub prime home loan program is the last loan program we will
mention. For people with poor credit who would not qualify for a conventional
loan or a VA or FHA guaranteed loan this is a suitable loan.
These home loan programs normally will require a higher down
payment and have a larger interest rate. This is due to the risk involved to
the mortgage company.
For a limited amount of time such as 2 to 4 years, these
loans should normally be considered. It is a good way to improve your credit
situation and then refinance with terms that are more favorable.
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