Mortgage Loan Types
What are the Different Types of Mortgage Loans?
Conventional – A conventional mortgage is a loan that is not guaranteed or insured by any government agency. It is typically fixed in its terms and rate.
FHA – An FHA loan is a mortgage issued by a federally qualified lender and insured by the Federal Housing Administration (FHA). FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment.
VA – A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan is issued by a qualified lender. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry).
USDA – A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture (USDA).
Jumbo Loans – A jumbo mortgage is a home loan for an amount that exceeds the Fannie/Freddie conventional, conforming loan limits established by regulation. The loan limits are typically adjusted in the fourth quarter of the year.
If you’d like to access the loan limits per your state and per your county, this is a useful link.
Remember, a Jumbo loan is any loan amount above the maximum Fannie/Freddie loan limit shown on this site – per state/per county.
For FHA and HECM (Reverse Mortgage) there is no “jumbo” loan. You just cannot exceed the maximum loan amount shown for either FHA or HECM (Reverse Mortgage).
Make sure to select your state/county, where indicated.
To select the Loan Limit per loan type – choose one of the following when you click on the drop-down arrow at “Limit Type”:
For FHA loan limits – the system defaults correctly to FHA Forward
For Reverse mortgage loan limits – choose “HECM”
For Conventional loan limits – choose Fannie/Freddie
What is a Fixed Rate Mortgage vs. an Adjustable Rate Mortgage Loan?
Fixed-Rate Mortgage (FRM) – A fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan.
Adjustable Rate Mortgage (ARM) – a mortgage whose interest rate is adjusted periodically to reflect market conditions.
What are Some Basic Mortgage Definitions?
PI – Principle + Interest (amount of the payment that goes towards paying down the loan balance and the interest paid to the lender, as a cost of borrowing the money).
TI – Taxes + Insurance (property taxes and homeowner insurance).
MI – Mortgage Insurance (MI is typically added to the monthly payment. It benefits the lender because if the borrower defaults on the mortgage loan, the lender receives an insurance payout to help offset the delinquent loan. Sometimes MI is built into the interest rate – and is not charged as a separate component. Loans that exceed 80% of the value of the home, are typically required to have MI).
PITI – Principle + Interest + Taxes + Insurance.
LTV – Loan to Value (Loan Amount divided by the Value of the Home).
CLTV – Combined Loan to Value (All Mortgage Loans added together divided by the Value of the Home).
FICO Score – The FICO mortgage score is between 300 and 850. Higher scores indicate lower credit risk. For higher FICO scores, borrowers are typically offered better loan terms.
What is the Difference Between a Pre-Qualification and a Pre-Approval?
Before you begin house-hunting, it is necessary to speak with a mortgage professional to get a good idea of what you can afford. This will increase your chance of having your offer accepted by a seller.
When you speak to a mortgage professional, you will want to discuss the differences and processes of obtaining either a Pre-qualification or a Pre-approval.
Based on the type of approval you are seeking, your mortgage professional will issue a “lender letter” – which you can provide to your Realtor- so that he/she knows how much you are qualified to purchase. Many Realtors will not take you out to look at homes until you have spoken to a lender- and have a lender letter.
Pre-qualification – you can typically speak with a mortgage professional – in person or on the phone – and provide him/her with basic information regarding your credit score, income, debt, desired sales price, down payment, and desired loan product. Based on the information you provide, the mortgage professional will provide you with an educated guess as to what you can afford.
This type of pre-qualification is not as reliable because none of your information is verified and is not considered to be as strong as a Pre-approval.
Pre-approval – by a Computer Underwriter – you can typically speak with a mortgage professional and provide him/her with basic information regarding your credit score, income, debt, desired sales price, down payment, and desired loan product. This differs from a pre-qualification because your lender will pull your credit report to verify your credit score and debt. Additionally, he/she will request income and asset verification. Based on this information, the mortgage professional will run your loan information through a “computer underwriter” – and that software will “pre-approve” you for a mortgage loan.
Pre-approval – with your loan request submitted to a human underwriter – this differs from a Pre-approval provided by a computer, as a true bank underwriter will be reviewing all of your credit, income, and asset documentation. The wait time to obtain this pre-approval will take a bit longer, but it is considered to be the strongest form of Pre-approval. Additionally, it demonstrates to the Realtors and the Seller that you are a serious Buyer and that you have really made an effort to get your pre-approval lined up.
It may help you negotiate a better deal with the seller, and it can shorten the timeline for getting a final loan approval and closing on your new home.
You will speak with a mortgage professional and provide him/her with bona fide documentation regarding your income and assets. The mortgage professional will pull your credit report to verify your credit score and your debt. You will discuss your desired sales price, down payment, and desired loan product. The mortgage professional will collect your signatures on various documents and submit your loan request to the bank. Your formal decision should arrive in the next several days.
Obtain a Mortgage
How do I find the best mortgage for me?
How Do I Get A Mortgage?
You will work with a trusted mortgage professional to apply for a loan.
How do I Select a Mortgage Professional or Real Estate Agent?
To locate a professional, here are some suggested resources:
1. You can access our Professional Directory.
2. Referral from a trusted source – family, friends, colleagues, etc
3. Contact your local bank
What Items Will I Need to Get a Mortgage?
This is a general list – so focus on the items that will pertain to you!
- Most recent 30 days of paycheck stubs
- Most recent two (2) years of W-2s and/or 1099s
- Most recent two (2) years of Federal Personal AND Business Tax Returns – all pages and schedules – ONLY IF:
- You have self-employment
- You have rental property
- You have un-reimbursed expenses on the Schedule A of your federal income taxes
- If a Tax Extension has been filed – please provide a signed copy
- Most recent two (2) months bank statements for all asset accounts that report monthly (all pages even if blank)
- Most recent quarterly bank statement for all asset accounts that report quarterly (all pages even if blank)
- Name and Number of homeowner insurance agent
- Should you have Rental Property, please provide a copy of:
- All unexpired lease agreements and a schedule of Real Estate
- The current mortgage statement
- The property tax bill for each property
- The homeowner insurance for each property
- Documentation from he HOA, which shows the HOA dues
- Name and number of current landlord (if applicable). Clarify if landlord is a Property Management Company or a Private Party
- Copy of driver’s license and social security card (front and back)
- Name and number of a contact at the place of employment so that we can obtain a written Verification of Employment
- Most recent mortgage statement(s) for current loans on the property (refinance only)
- Complete set of Bankruptcy papers – all pages and schedules, even if blank. Please include a copy of the Bankruptcy Discharge.
- If the current Mortgage has ever been Modified – copy of the fully executed Modification Agreement – (all pages even if blank)
- If there has been a short-sale or foreclosure, please provide the final Closing Disclosure (or HUD-1 Settlement Statement)
- Fully Executed Separation Agreement – IF applicable – (all pages even if blank)
- Fully Executed Child Support Order – IF applicable – (all pages even if blank)
What are good steps to take before I apply for a loan?
- Get all credit, income and asset documentation together – as outlined above in What Items Will I Need to Get a Mortgage?
- Don’t make a big purchase (car, RV, appliances, furniture, vacations, etc)
- Pay your bills on time
- Pay down revolving debt – ideally to 30% of the high credit limit.
- Do not close credit accounts – It’s better to have open accounts with no balance – the good credit history keeps your credit score higher
- Don’t open any new credit cards – even a new department store card can drop your score
- Don’t quit your job
- Don’t authorize multiple parties to pull your credit
- Research via multiple sources to determine your best lender and Realtor (See section above on ‘How do I Select a Real Estate Agent and a Mortgage Professional)
If I don't qualify on my own, who can co-borrow with me?
- Anyone that will live in the home and is 18 years of age or older.
- Closely related family member – that will not occupy the home
- Unrelated Borrower – that will not occupy the home
Depending on which scenario above works best for you, you will select a particular loan program. Please consult your mortgage loan professional to determine which loan program best meets your needs.
How much can a Seller Contribute towards my Closing Costs?
Conventional Loans –
Owner Occupied (Primary Residence) and Second Home
> 90% CLTV = 3% Max Seller Contribution to go towards (but cannot exceed) closing costs.
>75% & < 90% CLTV = 6% Max Seller Contribution to go towards (but cannot exceed) closing costs.
<75% CLTV = 9% Max Seller Contribution to go towards (but cannot exceed) closing costs.)
Investment Properties = 2%
For FHA mortgage – For all FHA loans, the seller and other interested parties can contribute up to 6% of the sales price toward closing costs, prepaid expenses, discount points, and other closing costs.
VA = This one is a little tricky to understand, so always consult with your preferred Mortgage Professional.
In general, there is no limit to the amount of loan fees and charges that can be paid on behalf of the buyer by other parties. The fees and charges need to be “reasonable”. The seller, lender or any other party may pay fees and charges, including discount point, on behalf of the borrower.
Seller Concessions – concessions are separate from the payment of the buyer’s loan fees or real estate closing costs – or payment of points as appropriate to the market. Seller Concessions may not exceed 4% of the value of the property as indicated on the Notice of Valuation (NOV). Concessions include, but are not limited to the following: payment of the buyer’s VA funding fee, prepayment of the buyer’s property taxes and insurance, gifts such as a TV or microwave oven, payment of extra points to provide permanent interest rate buydowns, provision of escrowed funds to provide temporary interest rate buydowns, and payoff of credit balances or judgments on behalf of the buyer.
USDA – USDA loan guidelines state that the seller may contribute up to 6% of the sales price toward the buyer’s reasonable closing costs.
Common Questions from First Time Home buyers
As a first time home buyer, what are some things I should know?
Are FHA loans only for first-time home buyers?
Not at all. The Federal Housing Administration was formed in 1934 to provide financing for low- and moderate-income buyers, but there is no maximum income for buyers or requirement that they are first-time buyers.
FHA has become a useful choice for many buyers whose credit situation might make conventional financing more difficult and more expensive.
FHA loans today require a minimum down payment and mortgage insurance for the life of the loan. Although it is not a first-time buyer program, it is very popular with these buyers, partly because many communities offer down payment and closing cost assistance for qualified first-timers, whose income falls beneath certain limits.
FHA is also an excellent choice for those buyers whose credit scores are at the lower end of the scale. Whereas conventional loans require a minimum FICO score of 620, FHA accepts scores much lower. Contact your lender for specific terms or to apply for an FHA loan.
As a first time homebuyer I don’t have a big down payment to put down. Should I wait or is it smarter to buy now?
Check out this “Buy vs. Wait Calculator” to determine your financial options.
Check out this opinion on whether waiting to save for that 20% down payment can actually cost you money: https://mgic-connects.com/waiting-save-20-payment-can-cost-homebuyers-money/
I’m a Millennial. Are there any First Time Homebuyer Resources especially for me?
Resources for Native Americans
I'm a Native American. Are there any special programs for me?
Section 184 Indian Home Loan Guarantee Program
See more information here: https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184
FAQs for the Section 184 Indian Home Loan Guarantee Program
See more information here: https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/homeownership/184/faq
Know Your Rights!
Fair Lending Equal Opportunity Housing for All
Real Estate Settlement Procedures ACT (RESPA)
Programs and Information In Your State
HUD Homes – Answers for Consumers, Lenders and Realtors
Consumer Financial Protection Bureau – Tools and Resources for Home buyers
How Do I Obtain Homebuyer Education and Certification?
Protecting My Identity
What Are Some Strategies to Protect My Identity?
Protecting your identity from criminals is critical to safeguarding you in many areas of your life – and may affect your ability to obtain a mortgage loan!
A major credit bureau and other prominent customer databases have experienced breaches, potentially impacting millions of people. Evaluating protection for yourself and your family should be a top priority!
Many consumers elect to work with companies that specialize in Identity Protection. One such option is Lifelock. Please click the link below and see if this company may meet your needs. If so – you may receive a discount, by signing up with Lifelock, just for being referred by your friends at Mortgage Moxie.
I'm a Vet. What kind of benefits do I qualify for?
Thank you for your service!!! We appreciate you so much!
Please see the following website.
For questions and assistance, please contact your Mortgage Professional or send us an inquiry.
Where can I go to for more information and support?
DFAS – http://www.dfas.mil/
USERRA – http://www.dol.gov/vets/programs/userra/
Department of HUD – http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/veteran_information
Department of Veteran Affairs – http://www.benefits.va.gov/homeloans
Free JAG legal assistance – http://legalassistance.law.af.mil/content/locator.php
FDIC Foreclosure Prevention – http://www.fdic.gov/consumers/loans/prevention/index.html
NeighborWorks America – http://www.nw.org/network/consumers/foreclosure-help.asp
Homeownership Preservation Foundation – http://www.995hope.org/blog/mortgage-relief-for-military-personnel
The Counselor’s Corner – www.TheCounselorsCorner.net Free membership, one-stop resource center
MHA – http://www.makinghomeaffordable.gov/programs/military-resources/Pages/default.aspx
Freddie Mac – http://www.freddiemac.com/mortgage_help/military_assistance.html
Fannie Mae – http://knowyouroptions.com/news/help-for-military-homeowners
CFPB – http://www.consumerfinance.gov/blog/servicemembers-you-have-new-mortgage-protections-in-2014/
Within CFPB: OSA – Office of Servicemembers Affairs
Federal Trade Commission — https://www.ftccomplaintassistant.gov/#crnt&panel1-1
SCRA – http://www.gpo.gov/fdsys/pkg/PLAW-108publ189/pdf/PLAW-108publ189.pdf
I have a Service-related disability. Are there special programs and assistance for me?
Waived for veterans with disabilities!
VA Funding Fee and Property Tax Waivers, per guidelines
Veterans receiving VA compensation for service-connected disabilities
Property tax waivers vary by state
- Veterans entitled to receive compensation but not currently in receipt because they are still on active duty
- Surviving spouses of veterans who died in service or from service-connected disabilities
Other Valuable Resources for Veterans!
For valuable assistance and support specifically for Veterans, here is one website that we have found helpful: http://bootsacrossamerica.org/.
National Director, Beverly Frase, is dedicated to support the Veteran and the Veteran’s family with the help of a strong network of professionals and volunteers across the nation. Boots Across America continually searches for ways to provide support to military personnel and their families through the inevitable fluctuations of economic and political climates.
They strive to update and educate the lenders and real estate professionals.
Credit and Debt Reduction
How Can I Learn my Credit Score? How do I obtain a copy of my Credit report?
A Borrower’s credit score is compiled by the three national credit bureaus, Equifax, Experian and TransUnion. Each of the Credit Bureaus has its own database.
Please see the following link to obtain information and to consult many resources:
How Can I Improve My Credit?
Your credit is one of the most important elements when you obtain your mortgage. It’s considered an “Adult Report Card”.
The lender is looking at:
* Your Mortgage Score
* Whether you’ve had any late payments (30 days or greater)
*The length of time that you’ve had your trade lines open
*The amount of credit you are using vs. your highest approved limit
For a very good explanation of what your credit score is made up of – and how to improve your overall credit score and credit profile, please click this link:
How Can I Dispute Items on My Credit Score?
How can I lower my Debt?
1. Create a realistic plan – with an end date in sight – and systematically pay down loan balances.
2. Limit taking out additional debt
3. Consolidate various loans and credit cards to lower monthly payments
4. Consolidate your student loans:
Options to consolidate your student loans and reduce your monthly payments:
A. Contact your current student loan servicer to learn about options
B. Contact the Department of Education to learn more options
C. Work with a Student Loan Professional at a private vendor
If you work in Public Service, the Student Loan Professionals can also assist you in requesting Student Loan Debt Forgiveness.
What if I've had a Bankruptcy and/or a Foreclosure?
Foreclosure: 1-3 years from completion date. (As little as 1 year if borrower qualifies for “Back to Work” program. Check with your lender for qualifying criteria.)
Short Sale Deed-In-Lieu: 3 years from completion date. (see note below about when the borrower is current on the mortgage and if the original loan wasn’t FHA)
Chapter 7 bankruptcy: 2 years from discharge date.
Chapter 13 bankruptcy: 2 years from discharge date. (Anything less than 2 years but greater than 1 year must be downgraded to a manual underwrite.)
Foreclosure: 2 years for loan amounts < $417,000 – 7 years for loan amounts > $417,000.
Short Sale: 2 years for loan amounts < $417,000 – 7 years for loan amounts > $417,000. (see comment below about no formal Waiting Period)
Chapter 7 bankruptcy: 2 years for loan amounts < $417,000 – 7 years for loan amounts > $417,000.
Chapter 13 bankruptcy: 1 year if the repayment period has elapsed, 7 years for loan amounts > $417,000. (Applicant must also receive written permission from the bankruptcy court/trustee to enter into a mortgage transaction – if not minimum waiting period is 2 years.)
Foreclosure: 3 years from completion date.
Short Sale: 3 years from completion date.
Chapter 7 bankruptcy: 3 years from discharge date, 1-year possibility with proven extenuating circumstances.
Chapter 13 bankruptcy: 1 year of the repayment period has elapsed. (Applicant must also receive written permission from the bankruptcy court/trustee to enter into a mortgage transaction – if not minimum waiting period is 2 years.)
Foreclosure: 7 years from completion date, 3-year possibility with proven extenuating circumstances.
Short Sale: 4 years from completion date, 2-year possibility with proven extenuating circumstances.
Chapter 7 bankruptcy: 4 years from discharge or dismissal date, 2-year possibility with proven extenuating circumstances.
Chapter 13 bankruptcy: 2 years from discharge date 4 Years from dismissal date, 2-year possibility with proven extenuating circumstances.
What is a Reverse Mortgage?
A reverse mortgage is a financial tool that will allow the Borrower to access a portion of their home equity and convert it into cash.
- Medical bills
- Debt Consolidation
- Home Repair
- RetirementBorrowers can use a Reverse Mortgage for BOTH a purchase or a refinance.
Youngest borrower must be 62 years of age or older.
You must own your own home and occupy it as your primary residence.
Independent counseling is required before initiating a loan request. The counselor is not affiliated with the lender. There is typically a fee of around $125 to the counselor.
Training can be done in person or online or over the phone.
You will need to have a credit report pulled by the lender and supply Social Security Income, Pension, etc.
You will also need to disclose annuities and any other income documentation – including 2 years of federal taxes.
2 months bank statements for all asset accounts.
Need a good estimate of property value. If you choose to move forward, you will need an appraisal that your bank will order on your behalf.
You will need significant equity or to have the home free and clear. Ask the intended bank for further qualifications.
Benefits of a Reverse Mortgage
- Borrower will not owe more than the value of their homes at the time the home is sold
- Borrower will not have payments on the loan, as long as the Borrower complies with the terms of the loan
- Borrower will not lose Social Security or Medicare benefits
- Borrowers achieve greater financial freedom
I want to Refinance. What information will my lender need:
Credit, Income and Assets – as identified in section
What Items Will I Need to Get a Mortgage?
A copy of your current mortgage statement and answers to the following questions:
1. Approximate value of your home
2. Do you want any cash out? If so – how much?
3. What is your goal – lower the rate and payment OR pay the loan off sooner
4. Do you have an estimation of your credit score?
5. Do you anticipate any issue with your income qualifying for the new loan
6. Is the home a condo, a townhome or a single-family residence?
7. How long do you anticipate keeping your home?
What is HARP? Is it a good solution for me?
The Home Affordable Refinance Program (HARP) is a great Refinance option for homeowners who have little or no equity, or owe more than their home is worth. HARP will end December 31, 2018, so now is the time to check your eligibility.
To learn more – and to check your Eligibility – please click here: