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Loan Programs

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing
and Urban Development (HUD), administers various mortgage loan programs. FHA
loans have lower down payment requirements and are easier to qualify than
conventional loans. FHA loans cannot exceed the statutory limit.

If you are looking for an FHA home loan right now, please feel free to request
personalized rate quotes from HUD-approved mortgage lenders via our website.

VA loans

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows
veterans and service persons to obtain home loans with favorable loan terms, usually
without 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 determines your eligibility and, if you are qualified, VA will issue you a
certificate of eligibility to be used in applying for a VA loan.

VA-guaranteed loans are obtained by making application to private lending institutions.

RHS Loan Programs

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for
rural residents with minimal closing costs and no downpayment.

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. Securities are sold
through financial institutions that trade government securities.

State and Local Housing Programs (Downpayment assistence S.H.I.P)

Many states, counties and cities provide low to moderate housing finance programs,
down payment assistance programs, or programs tailored specifically for a first time
buyer. These programs are typically more lenient on the qualification guidelines and
often designed with lower upfront fees. Also, there are often loan assistance programs
offered at the local or state level such as MCC (Mortgage Credit Certificate) which
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 loans may be conforming and non-conforming. Conforming loans have
terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie
Mac. These two stockholder-owned corporations purchase mortgage loans complying
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 results in the availability of mortgage credit for Americans.

Jumbo Loans

Loans above the maximum loan amount established by Fannie Mae and Freddie Mac
are known as 'jumbo' loans. Because jumbo loans are bought and sold on a much
smaller scale, they often have a little higher interest rate than conforming, but the
spread between the two varies with the economy.

With bi-weekly mortgage plan you pay half of the monthly mortgage payment
every 2 weeks. It allows you to repay a loan much faster. For example, a 30 year
loan can be paid off within 18 to 19 years.

Balloon loans

Balloon loans are short-term fixed rate loans that have fixed monthly payments based
usually upon a 30-year fully amortizing schedule and a lump sum payment at the end of
its term. Usually they have terms of 3, 5, and 7 years.

The advantage of this type of loan is that the interest rate on balloon loans is generally
lower than 30- and 15- year mortgages resulting in lower monthly payments. The
disadvantage is that at the end of the term you will have to come up with a lump sum to
pay off your lender, either through a refinance or from your own savings.

Balloon loans with refinancing option allow borrowers to convert the mortgage at the
end of the balloon period to a fixed rate loan -- based upon the outstanding principal
balance -- if certain conditions are met. If you refinance the loan at maturity you need
not be requalified, nor the property reapproved. The interest rate on the new loan is a
current rate at the time of conversion. There might be a minimal processing fee to
obtain the new loan. The most popular terms are 5/25 Balloon, and 7/23 Balloon.

Adjustable Rate Mortgages

Variable or adjustable loan is loan whose interest rate, and accordingly monthly
payments, fluctuate over the period of the loan. With this type of mortgage, periodic
adjustments based on changes in a defined index are made to the interest rate. The
index for your particular loan is established at the time of application.

Fixed-period ARMs

With fixed-period ARMs homeowners can enjoy from three to ten years of fixed
payments before the initial interest rate change. At the end of the fixed period, the
interest rate will adjust annually. Fixed-period ARMs -- 30/3/1, 30/5/1, 30/7/1 and
30/10/1 -- are generally tied to the one-year Treasury securities index. ARMs with an
initial fixed period beside of lifetime and adjustment caps usually have also first
adjustment cap. It limits the interest rate you will pay the first time your rate is adjusted.
First adjustment caps vary with type of loan program.

The advantage of these loans is that the interest rate is lower than for a 30-year fixed
(the lender is not locked in for as long so their risk is lower and they can charge less)
but you still get the advantage of a fixed rate for a period of time.

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By Zuhanny Sanchez
Loan Specialist

We Make Mortgages Happen