Conventional loans are mortgage loans that are not guaranteed or insured by any government agency. They are typically offered by private lenders and have varying terms and requirements depending on the lender. These loans often require a higher credit score and a larger down payment compared to government-backed loans. Conventional loans offer flexibility in terms of loan amounts, property types, and repayment options. Borrowers with a strong credit history and stable income may find conventional loans attractive due to potentially lower interest rates.

What are Conventional Loans?

Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have better rates, terms and/or lower fees than other types of loans. However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20% and reliable monthly income. Conventional loans are ideal for borrowers with excellent credit and at least a 5% down payment.

Most Common Types of Conventional Loans

Fixed Rate Mortgages: Your rate and payment never change.

• 30 Year Fixed LoanBenefits: Lowest fixed monthly payments
• 20 Year Fixed LoanBenefits: Low fixed monthly payments
• 15 Year Fixed LoanBenefits: Lower rate than the 30 or 20 Year Fixed Loans; Pay less interest and pay your home off more quickly.
• 10 Year Fixed LoanBenefits: Lower rate; Pay off your loan and build equity faster.
• 5 Year Fixed LoanBenefits: Lowest rate; Pay off your loan and build equity the fastest

Adjustable Rate Mortgages: After the initial period your interest rate can change once a year.

• 3/1 ARMFixed Rate for 3 Years, Adjustable Rate for the remaining 27 years
• 5/1 ARMFixed Rate for 5 Years, Adjustable Rate for the remaining 25 years
• 7/1 ARMFixed Rate for 7 Years, Adjustable Rate for the remaining 23 years

What are the Conventional Down Payment Requirements?

For Purchase transactions, Conventional Loans require the home-buyer to put down at least 5% - 20% of the purchase price of the home. For a Refinance transaction, most lenders require at least 10% equity in the property.

What types of property are eligible?

Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.

FHA (Federal Housing Administration) loans are government-backed loans that are insured by the FHA. These loans are designed to help first-time homebuyers and individuals with lower credit scores and smaller down payments. FHA loans have more lenient qualification criteria and allow down payments as low as 3.5% of the purchase price. They also offer more flexible credit requirements and can be assumable, meaning that the loan can be transferred to a new buyer if the property is sold.

New Changes in FHA Loans

In response to the growing housing situation in the United States the loan limits for FHA Loans has been temporarily raised. Depending on where you live you might find it even easier to qualify for a FHA loan.

As FHA Loan specialists we can help you understand any new changes to the FHA loan program. We're here to create a customized solution that works best for you and your family. To learn more contact us.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.

USDA (United States Department of Agriculture) loans are targeted at homebuyers in rural and suburban areas. These loans are backed by the USDA and aim to promote homeownership in eligible rural areas. USDA loans often have competitive interest rates and require no down payment. They also have income limits, and the property must meet specific location and condition requirements.

Benefits of USDA Loans

• 100% Financing - you can buy a home with no money down. In some cases you can even finance your closing costs.
• You can refinance your home up to 100% of the value of your home.
• Low Fixed Rate Mortgage Options.
• They are usually easier to get because the Government insures the loan so that there is much less risk to the lender.
• They can be used for Existing Homes, Foreclosures or New Construction.
  Simple Loan Process.
• No Loan Limit. No Acreage Limit.
• There is No Prepayment Penalty.
• You can use the loan to repair or add on to your home.
• Flexible Credit Requirements.

Who is eligible for a USDA Loan?

Generally these loans are available to anyone who meets minimum credit guidelines and local area income requirements and is purchasing a home or refinancing their home in an area that is not considered a major metropolitan area by USDA.

Some common misconceptions of USDA Loans:

• They are just for farmers - USDA Loans are not "just for farmers," millions of people from all walks of life already qualify.
• FHA or Conventional Loans are better - USDA Loans often offer better terms than an FHA or conventional loans.
• They aren't flexible - Actually, USDA Home Loans can be used to buy a new home or refinance to a lower rate.
• Only certain people can qualify - Anyone who meets the income and credit guidelines can qualify for a USDA Home Loan.
• They are only for rural areas - Actually, USDA Loans are available in many areas that most people would not consider rural. For example, many small communities just outside of metropolitan areas qualify as rural areas according to the US Department of Agriculture.
• They are harder to get than FHA or Conventional Loans - This just isn't true. In many cases USDA Loans are actually easier to get because the loans are guaranteed by the government.

VA (Veterans Affairs) loans are available to eligible veterans, active-duty service members, and their spouses. These loans are guaranteed by the Department of Veterans Affairs and are designed to make homeownership more accessible for those who have served in the military. VA loans often offer competitive interest rates, require no down payment, and do not require private mortgage insurance (PMI). They have flexible credit requirements and provide additional benefits such as assistance with closing costs.

Benefits of VA Loans

• You can buy a home with no money down.
• You can refinance your home up to 100% of the value of your home.
• You never have to pay PMI (Private Mortgage Insurance).
• Sellers can pay your closing costs.
• They are usually easier to get because the Government insures the loan so that there is much less risk to the lender.
• If you already have a VA Loan you might be eligible for a VA Streamline Refinance.
• Disabled Veterans may qualify for a waiver of the Funding Fee if they receive any disability payments from the VA or if they are considered to be at least 10% disabled.

Who is eligible for a VA Loan?

As a rule of thumb, almost all active duty or honorably discharged service members are eligible for a VA loan.

You may be eligible for a VA loan if any one of these statements describes you:

• I served 181 days during peacetime. (Active Duty)
• I served 90 days during wartime. (Active Duty)
• I served 6 years in the Reserves or National Guard.
• I am the spouse of service member who was killed in the line of duty.
• I currently receive disability payments from the VA.

What is the VA Funding Fee and is it required?

Yes, it is required. It is a fee paid directly to the Department of Veteran's Affairs so that they can guarantee your loan and provide you with the opportunity to receive a loan with little to no money out of pocket.

How much is the VA Funding Fee?

It depends on several factors including: Whether you are Active Duty, Retired, Guard or Reserve and whether you this is a first time use, subsequent use, or a cash-out refinance as well as how much of a down payment you are putting down. The fee can range from as little as 1.25% up to 3.3% of the loan. Generally, the more money you put down the lower the VA funding fee. Please contact us and we will help you to determine how what the exact cost of the VA Funding Fee would be for your particular situation.

Do I have to pay the VA Funding Fee out of pocket?

No, you can include the VA Funding Fee in your loan and pay the funding fee over the course of your loan.

Do I still have to pay other normal closing costs like Appraisal, Title and Escrows?

Yes, however with a VA loan if you are purchasing a new home the seller can pay for all or part of your closing costs.

What is a VA Streamline Refinance?

A VA Streamline Refinance is a refinance option that is available if you already have a VA mortgage and you want to lower your interest rate with little or no out-of-pocket closing costs. You don't have provide bank statements, W2s, job verification or paychecks.