When it comes to shopping around for mortgages, conventional loans are a good option to look into for borrowers with good credit and a stable income. They do have stricter requirements than other loan types, however, if you qualify then a conventional loan can be a great tool to purchase your home.
Jumbo mortgages resemble conventional mortgages, the only difference here is that jumbo mortgages are loans that exceed conforming loan limits established by regulation. They are typically used to buy a high-priced or luxury home and thus have tighter guidelines than other loan types. If you have a low debt-to-income ratio, a strong credit score, and a large down payment, than a jumbo loan may be what you are looking for.
GOVERNMENT LOANS + PROGRAMS
FHA (Federal Housing Authority)
Borrowers who have a minimal down payment (3.5%) will often choose this option. FHA loans are provided by an FHA approved lender and backed by the Federal Housing Administration. An FHA mortgage can be an attractive option for first-time homebuyers, those seeking a smaller down payment option or homeowners who have experienced past credit issues. FHA mortgages allow for a lower percent down payment and offer numerous credit and guideline enhancements extending home-ownership beyond conventional lending guidelines. An FHA loan requires Federal Mortgage Insurance for the term of the loan.
VA (Veteran Administration)
Military veterans who have minimal down payment can apply for a VA loan. A VA loan is designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.
Borrowers who are of retirement age 62 and no longer want a monthly payment have an option for a Reverse Mortgage. The Home Equity Conversion Mortgage (HECM) is FHA’s Reverse Mortgage program. It is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, borrowers do not have to repay the loan until the borrower no longer uses the home as their principal residence or fails to meet the obligations of the mortgage.
HARP – Home Affordable Refinance Program
Borrowers not behind on their payments with a decline in their home value and unable to refinance through traditional means often choose this option. HARP is designed to help you get a new, more affordable, more stable mortgage. If you’re not behind on your mortgage payments but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program (HARP).
Borrowers with poor credit or no down payment are given the opportunity to apply for a HUD loan. A HUD loan helps low-income families enjoy homeownership. The Department of Housing and Urban Development (HUD) promotes homeownership among families in all income brackets. As a part of its core mission, HUD insures mortgage loans for families with poor credit or financial struggles, giving mortgage lenders an incentive to extend loans to borrowers with high default risks. As a type of subprime mortgage loan, HUD loans carry a unique set of advantages and disadvantages to borrowers, lenders, the government and society as a whole.