Types of Loans

What is a FHA loan?

FHA loans are insured by the Federal Housing Administration and designed to make homeownership affordable especially for first-time home buyers.

A FHA mortgage is actually available through many of the same banks or lending institutions you would normally work with because FHA doesn't actually make the loan. Instead, FHA insures the loans made by other lenders when a home buyer wouldn't otherwise qualify for a conventional mortgage.

Benefits of FHA loans include:

• No PMI or private mortgage insurance
• Low down payment
• Favorable fates and terms especially for first-time home buyers

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How can I find FHA loan limits for my area?

FHA loans have allowed millions to purchase a home with a low down payment, affordable interest rates and no PMI. It's a great program once you understand the limits. One of the primary restrictions you should be aware of is the actual loan limit in your area.

FHA loan limits change frequently and are different depending upon where you live. It makes sense to compare FHA loan limits between different cities and even states if you are thinking about obtaining an FHA loan.

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Should I obtain a fixed or adjustable rate home loan?

Two of the most popular types of home loans include fixed rate loans and adjustable rate loans (ARM). Fixed rate loans have a steady interest rate over a specific period of time, usually between 15 to 30 years. You know exactly what your principle and interest payment for the mortgage will be each month for the entire duration of the loan. Adjustable rate loans reset at different times throughout the loan and can result in fluctuations in the monthly mortgage payment.

Not sure which type of loan is the best choice for you? Use this quick checklist and then find a lender in your local area.

1. Do you anticipate a substantial increase in income or earnings over the next few years? If so, then an adjustable rate might be a good choice.

2. Do you anticipate a stable or even declining income in the next few years? Is your job or your spouses career subject to down-sizing? Is anyone nearing retirement age? If so, a fixed rate mortgage might be a good choice.

3. Do you intend to live in the home for less than five years? If so, an adjustable rate mortgage might work for your situation.

4. Do you intend to live in the home for more than five years or are you not sure how long you will remain in the home? If so, a fixed rate mortgage might work for your situation.

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How do I find a lender?

If you are confused about the different types of loans available, but would like to purchase your very own home then follow these quick steps to find a lender that will work for you.

1. Call the HUD-approved Housing Counselor program at (800) 569-4287 to speak to a housing counselor. They are trained to inform and educate you about different programs that you might be eligible for including FHA loans or veterans mortgage programs.

2. Research state and local programs in your area. Look for state-by-state lists of local programs that provide everything from down payment assistance to first-time home buyer programs.

3. Visit homesandland.com to use the real estate agent search tool and locate a qualified real estate professional that handles FHA, HUD or VA listings. They will be familiar with the requirements and lenders in your area.

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Should I refinance my interest only mortgage?

Interest-only mortgages are exactly what they sound like – a type of mortgage that allows a buyer to pay only the interest (rather than the principle and interest) due on the mortgage each month. This results in lower monthly payments, but doesn’t build any equity whatsoever. In an appreciating real estate market or when the buyer intends to remain in the house for less than five to seven years, an interest-only mortgage can make good financial sense. However, in a stagnant real estate market or if the house can’t be sold and there is little to no equity in the house, then an interest-only mortgage can become a burden; especially after initial teaser rates reset.

If you have an interest-only mortgage loan, then it might be a good idea to find a lender that will help you shop and compare different types of loans, especially if you are a veteran or eligible for other special types of home loans.

Use this quick checklist to see if refinancing or shopping for other types of home loans may benefit your situation:

1. I intend to remain in my home longer than expected.

2. I have little to no equity.

3. My initial rates are due to reset and I will have difficulty repaying the loan at the higher rate.

4. I am eligible for a lower fixed rate loan and intend to remain in the house.

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What are the benefits of a veterans mortgage?

The Veterans administration loan program for military veterans is designed to make home ownership affordable with little to no money down. To qualify for a veterans mortgage, you need to be in the military or a veteran and complete the ACE or Automated Certificate of Eligibility form. If your information is incomplete, then you may also need to fill out a VA form 22-1880 or a Request for Certificate of Eligibility.

Once you are certified as eligible to participate in the VA Loan program, it is a good idea to get pre-approved and begin searching for a home using the homesandland.com real estate search guide. VA home loans can be used to purchase a home for up to $417,000, but your specific loan amount will depend upon your personal financial situation.

In addition to no down payment, VA home loans have the added benefit of not requiring PMI or private mortgage insurance. Instead, there is a one time "vendee fee" which is typically far less than the cost of paying years of PMI.

Not sure if you qualify? Use this quick checklist to see if you qualify for a zero down payment low interest VA loan. To be eligible for a VA home loan you must:

• Be a veteran who has served 90 days of active duty during wartime or 181 continuous days during peacetime.
• Have served in the National Guard or Reserves for six years.
• Have any discharge status other than dishonorable.

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How can I find a VA foreclosure?

One Veterans Administration Loan program that few people are familiar with is the VA Vendee Loan program for foreclosed VA homes. This loan program is available for military and non-military home buyers and investors.

The benefits of the VA Vendee program are similar to traditional veterans loans: low down payment, low interest rates and elimination of PMI. However, there are some things to keep in mind when searching for veterans loans.

First, all veterans mortgage programs require a Vendee fee - typically about 2.5 percent of the loan amount. Secondly, veterans and military personnel may be eligible for additional down payment or other assistance when purchasing a foreclosed VA home. Finally, unlike the traditional VA loan program, the VA foreclosure program is only available for specified foreclosed homes.

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