Home Loan Programs can be divided into categories in two different ways. Firstly, conventional and government loans. Secondly, all the various home loan programs may be classified as fixed rate loans, adjustable rate loans and their combinations.
Part of the U.S. Dept. of Housing and Urban Development (HUD), Federal Housing Administration (FHA) home loan program administers various house loan programs.
When comparing with conventional house loan programs, FHA loans have lower down payment requirements and are easier to qualify. Statutory limit cannot be exceeded by FHA loans.
FHA loans are programs to helping low income families become homeowners. By protecting a mortgage company from default, they encourage companies to make loans to families that many not meet normal credit guidelines.
U.S. Dept. of Veterans Affairs guarantees VA home loan programs. By means of favorable loan terms, the guaranty allows veterans and service persons to obtain home loans devoid of a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000.
The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA will issue you a certificate of eligibility to be used in applying for a VA loan, if it determines your eligibility and you are qualified.
For military veterans discharged under conditions other than dishonorable, who are served on active duty are accessible for VA loans.
Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 day’s active service. There are other eligibility requirements. If you think you may be eligible, contact your local or state veterans’ administration representative.
RHS Loan Programs
With minimal closing costs and no down payment, the Rural Housing Service (RHS) home loan program of the U.S. Dept. of Agriculture guarantees loans for rural residents.
Ginnie Mae, which is part of HUD, guarantees securities backed by pools of mortgage loans insured by these three federal agencies – FHA, or VA, or RHS. By means of financial institutions, trade government securities will be sold.
State and Local Housing Programs
Many states, counties and cities provide low to moderate home loan programs, down payment assistance programs, or programs intended particularly for a first time buyer. These programs are naturally more lenient on the qualification guidelines and often designed with lower upfront fees.
Also, at the local or state level such as MCC (Mortgage Credit Certificate) there are often loan assistance programs offered that allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market.
Conventional home loan programs may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac guidelines institute the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announce new loan limits every year.
These two stockholder-owned corporations purchase home loan programs fulfilling with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors.
By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing that result in the availability of mortgage credit for Americans.
Jumbo loans are the loans that are above the maximum loan amount established by Fannie Mae and Freddie Mac. Jumbo Loans often have a little higher interest rate than conforming since they are bought and sold on a much smaller scale, but the spread between the two varies to the economy.
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Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called ‘B’, ‘C’ and ‘D’ paper loans vs. ‘A’ paper conforming loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports.
Their purpose is to offer temporary financing to these applicants until they can qualify for conforming “A” financing. The interest rates and programs vary, based upon many factors of the borrower’s financial situation and credit history.
If you were to choose this type of home loan program, you would need to check what the current year’s limits are for an accurate amount. There are limits that are adjusted annually if needed based on the national average of new homes.
Government-sponsored lenders secure conventional loans. They are also known as government sponsored entities (GSE’s). They can be used to purchase or to refinance single family or four plex homes with a first or a second mortgage.
Sub prime home loan program is the last loan program we will mention. For people with poor credit who would not qualify for a conventional loan or a VA or FHA guaranteed loan this is a suitable loan.
These home loan programs normally will require a higher down payment and have a larger interest rate. This is due to the risk involved to the mortgage company.
For a limited amount of time such as 2 to 4 years, these loans should normally be considered. It is a good way to improve your credit situation and then refinance with terms that are more favorable.