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FHA, VA, no-doc, full disclosure…if you’re applying for a new mortgage loan or a refinance, odds are you’re
confused by all the terms. Before you make a decision about your new loan, take a few minutes to learn about the many loan
options available to you.
FHA – A loan insured by the Federal Housing Authority, these government insured loans were designed to provide
financing for lower to middle income families. FHA loans typically have lower down payment requirements than conventional
loans (as low as 3%), and because they are government insured, may be available to buyers with less-than-perfect credit.
The maximum amount of the loan is determined by where the home is located. For example, as of December 2006, the maximum
for a single-family home in the Fort Lauderdale Florida area was $362,790, while the cap for a home in Provo, Utah was $208,050.
You can determine the maximum FHA loan amounts for your area at https://entp.hud.gov/idapp/html/hicostlook.cfm. Choose your
state and fill in the county name for current regional FHA limits.
VA - The Department of Veteran Affairs guarantees loans for eligible veterans or their unmarried widows or widowers.
The loans offer low or zero down payments, and may have a lower interest rate than a conventional mortgage. There are restrictions
on the age and condition of the house for a VA buyer. Credit requirements are similar to FHA loans.
CONVENTIONAL - A conventional loan is a fixed or adjustable rate loan not insured by a government agency. More flexible
than government backed loans, this type of financing does not have pre-set regional limits, and may be customized in a variety
of ways, including:
BALLOON LOANS -- A balloon loan is a conventional loan designed with lower monthly payments for a fixed period of time,
with the full balance of the loan due at the end of that time. For example, if a seven year balloon was selected, the buyer
would make regular monthly payments each month for seven years. After the last regular payment, the full loan balance would
be due. The buyer might elect to pay the balance in full or refinance before the balloon payments is due.
TEMPORARY BUY-DOWN – A buyer may elect to reduce the interest rate for the first few years of a loan by paying
an extra fee upfront. This not only reduces the monthly payments during the first few years, but may allow the buyer to qualify
for a higher over-all loan amount.
NO-DOC or STATED – Most people think of mortgages as something that requires a tremendous amount of paperwork,
with proof of everything from income and taxes to previous rent or mortgages. For those who cannot, or would rather not provide
proof of income and expenses, a variety of low or no documentation loans are available. Based in large part on the buyer’s
credit score and down-payment, these loans can offer people without sufficient documentation for a traditional loan to obtain
a first mortgage or refinance loan. The interest rates and down payment requirements for these loans are somewhat higher
than those offered for traditional mortgages.
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