Types of Mortgages Available for a Purchase or Refinance
Fixed-Rate
Fixed-rate mortgage loans have the same interest rate for the entire repayment term. Because of this, the size of your monthly payment will stay the same, month after month, and year after year. It will never change. This is true even for long-term financing options, such as the 30-year fixed-rate loan. It has the same interest rate, and the same monthly payment, for the entire term.
Adjustable-Rate
Adjustable-rate mortgage loans (ARMs) have an interest rate that will change or “adjust” from time to time. Typically, the rate on an ARM will change every year after an initial period of remaining fixed. It is therefore referred to as a “hybrid” product. A hybrid ARM loan is one that starts off with a fixed or unchanging interest rate, before switching over to an adjustable rate. For instance, the 5/1 ARM loan carries a fixed rate of interest for the first five years, after which it begins to adjust every one year, or annually. That’s what the 5 and the 1 signify in the name.
MORTGAGE CALCULATOR
Government-Insured vs. Conventional Loans
A conventional home loan is one that is not insured or guaranteed by the federal government in any way. This distinguishes it from the three government-backed mortgage types explained below (FHA, VA and USDA).
Government-insured home loans include the following:
FHA Loans
The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), which is a department of the federal government. FHA loans are available to all types of borrowers, not just first-time buyers. The government insures the lender against losses that might result from borrower default. Advantage: This program allows you to make a down payment as low as 3.5% of the purchase price. Disadvantage: You’ll have to pay for mortgage insurance, which will increase the size of your monthly payments.
VA Loans
The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. This means the VA will reimburse the lender for any losses that may result from borrower default. The primary advantage of this program (and it’s a big one) is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever.
USDA / RHS Loans
The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements. The program is managed by the Rural Housing Service (RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to “rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.” Income must be no higher than 115% of the adjusted area median income [AMI]. The AMI varies by county. See the link below for details.
Jumbo vs. Conforming Loan
There is another distinction that needs to be made, and it’s based on the size of the loan. Depending on the amount you are trying to borrow, you might fall into either the jumbo or conforming category. Here’s the difference between these two mortgage types.
Conforming Loan
A conforming loan is one that meets the underwriting guidelines of Fannie Mae or Freddie Mac, particularly where size is concerned. Fannie and Freddie are the two government-controlled corporations that purchase and sell mortgage-backed securities (MBS). Simply put, they buy loans from the lenders who generate them, and then sell them to investors via Wall Street. A conforming loan falls within their maximum size limits, and otherwise “conforms” to pre-established criteria.
Jumbo Loan
A jumbo loan, on the other hand, exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. This type of mortgage represents a higher risk for the lender, mainly due to its size. As a result, jumbo borrowers typically must have excellent credit and larger down payments, when compared to conforming loans. Interest rates are generally higher with the jumbo products, as well.
Fill out a short loan application form
Specialty Financing
Reverse Mortgage
You must be at least 62 years of age and one can borrower more the older one is and the more equity one has. Lenders will give you money to buy a house, even if you have bad credit and no money. Subprime mortgages were designed to help people who experience setbacks—like divorce, unemployment, and medical emergencies get a house. Poor credit and no income are acceptable for this type of loan.
Portfolio Loans
Portfolio loans are underwritten and serviced by the originating lender and not sold on the secondary mortgage market. This allows for aggressive underwriting guidelines and reduced lending criteria. There are some fantastic loan options here which include bank- statement programs and stated income for self-employed individuals. These programs also generally allow for recent mortgage payment lates and credit deficiencies that other lenders will not allow on government or conventional lending programs.
Private/Hard Money
These are fantastic loans for people with tarnished credit, recent foreclosures, short sales, or mortgage lates and/or the condition of the property is rough and hard to lend on. These loans are only for rental Properties, investment purpose, or business opportunities. Not for the purpose of a refinance or purchase of a primary residence. The terms are usually from one to three years and have balloon payments and a minimum interest guarantee reserve requirement. Proof of repayment ability is still required, along with a reasonable exit strategy as this is short term bridge financing. Interest rates usually range from 8.0%-15.0%.
Commercial Financing
We offer commercial refinancing and purchase loans all over the state of California. Standard down payment requirements are 30-40% of the purchase price or appraised value. On refinances we can usually go to 65-70% of the appraised value. Standard commercial finance terms are 3/1, 5/1, 7/1 ARM’s amortized for 15-25 years.
SBA Loans
These are government issued commercial loans through the U.S. Small Business Administration. One can use this to purchase a business and/or a business and a commercial building. Start or expand your business with loans guaranteed by the Small Business Administration. Use Lender Match to find lenders that offer loans for your business.