Loan Programs
Loan Programs:
There are many different types of loan programs. Let’s talk about conventional vs government loans first.
- Conventional loans are home loans which are not insured by the Federal government and come in 2 categories – conforming and non-conforming real estate
- Government loans are home loans which are insured by the Federal government and are those loan programs are available under the Federal Housing Administration (FHA loans) and Dept of Veteran Affairs (VA loans)
- Home Equity loans are typically 2nd mortgages against a home.
Conventional Loans
Most conventional loans are loans which qualify under Fannie Mae or Freddie Mac guidelines and these are also called conforming real estate loans. Non-conforming loans are loans which are approved outside of these agency guidelines. An example are Jumbo loans which do not meet Fannie Mae/Freddie Mac standards and allow for higher loan amounts. Loan originators offering non-conforming loans either keep them for their own portfolios, collateralize them and issue their own securities, or sell them to entities other than Fannie Mae/Freddie Mac who manage them or securitize them. Lenders can offer conventional loans with Fixed Rate or Adjustable Rate products.
Government Loans
FHA Mortgage Insurance Program
This government backed mortgage insurance program provides insurance for fixed rate 30-year mortgages. These mortgages may be written with a down payment of as little as 3.5% and tend to have more flexible underwriting guidelines than conventional loans. Borrowers with lower credit scores may still receive loan approval under this program, but it is available for owner occupied borrowers only. Lenders offer FHA Loans with 30 yr fixed rates, 15 yr fixed rates and Adjustable Rates.
VA Home Loans
This government backed mortgage insurance program provides insurance for veterans who have served or are currently servicing our country. It is available for active military and veterans, national guard/reservists, and surviving spouses of deceased veterans. The key benefits of obtaining a VA loan is that a borrower can purchase with 0% down and there are no monthly mortgage insurance premiums. This is the only loan currently available without down payment requirements but the borrowers must be applying for a loan for their primary residence if it is a purchase loan.