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Loan Programs
Due to the recent mortgage crisis, there aren’t as many loan programs available to borrowers as in the past. Lenders have tightened underwriting guidelines making getting approved for home financing more challenging. The minimum credit score requirement for most programs is now 620. In most cases, a down payment is required and debt to income ratios can’t exceed 45%.
After we meet with out client’s and take a full loan application, we are able to provide compare each program to see what program is best for each of our clients. No program is clearly better than the next, each situation is different and thus is very important to work with a mortgage company who can communicate each program and tailor the best program to your situation.
The lending programs available in today’s market:
Conventional (Fannie Mae & Freddie Mac)
A conventional mortgage is a loan that is not guaranteed or insured by any government agency. It is typically fixed in its terms and rate.
Government agencies such as the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA) can insure or guarantee loans. The FHA is a part of the Department of Housing and Urban Development and insures residential mortgage loans made by private lenders. The FmHA provides financing to farmers and other qualified borrowers who may have trouble getting loans. VA loans are for veterans or members of the military and can have a lower down payment.
Mortgages not guaranteed or insured by these agencies are known as conventional mortgages. These mortgages adhere to Fannie Mae guidelines. Fannie Mae, or Federal National Mortgage Association, is a corporation created by the federal government that buys and sells conventional mortgages. It sets the maximum loan amount and requirements for borrowers.
Usually, a conventional mortgage is a 30-year fixed rate loan. That means it has a fixed interest rate for the 30 year term of the mortgage. Conventional mortgages also typically require at least a 20 percent down payment. For example, if a house costs $200,000, the lender will provide a loan for 80 percent of that amount. So, $160,000 is financed through the lender and the borrower must pay $40,000 cash.
Conventional mortgages can have better interest rates than non-conventional mortgages and can be a great option for those with the 20 percent down payment. However, even if the borrower does not have a 20 percent down payment, it is still possible to get a mortgage. By putting less down and accepting a possibly higher interest rate, the borrower can still get financing through a non-conventional mortgage.
Federal Housing Administration (FHA)
The most popular FHA home loan for home buyers is the 203(b). This is your standard fixed rate loan for 1-4 family occupied properties and only requires a minimum down payment of 3.5% from the borrower. The program does allow for the down payments to be gifted from relatives.
The main advantage to the FHA loan is the credit criteria is not as strict as conventional lending guidelines. Someone with some credit problems or no traditional credit should not have a problem obtaining FHA financing. The monthly mortgage insurance is less than a conventional loan and the down payment requirement is less.
Many people make the mistake that FHA is only for first time home buyers. This is not true. FHA loans are available to anyone, whether it is your first or fifth home. If refinancing a home the current loan does not have to be an FHA loan.
The greatest disadvantage of the FHA home loan is that FHA limits the loan size the borrower can borrow. Others may try to convince you the upfront mortgage insurance premium (MIP) is a disadvantage. However, this amount makes a small increase in the borrower’s monthly payment and is partially refundable in certain cases.
Department of Veterans Affairs (VA)
Uncle Sam has a gift for the men and women who serve our country. It is the VA loan. The VA loan, short for Department of Veterans Affairs home loans, is available to veterans, active service members, reservists, and members of the Public Health Service. These loans are so popular, that in the past fiscal year alone, Uncle Sam has guaranteed 300,000 VA loans totaling more than $38 billion.
Why are these loans considered a gift to our servicemen and women? Because VA loans require no down payment and are available from most lenders. Additionally, the government limits the amount of closing costs, origination fees, and appraisal fees. Because VA loan rates generally run the same as conventional rates, skipping the down payment is a big advantage. Not surprisingly, about 91 percent of VA buyers do just that.
Best of all, there is no private mortgage insurance (PMI) because the government prohibits lenders from requiring it. Not having PMI is a considerable cash savings for a borrower. For example, on a $126,000 loan, PMI would run approximately $40 to $64 a month for the first three to five years of a 30-year loan. The total savings? $1,440 to $3,840.
Applying for a VA loan is no different than applying for a conventional loan, except that one needs to obtain a certificate of eligibility from the VA. Not only are VA loans easy to get, Uncle Sam has made it even easier this year. The actual loan process takes about two to six weeks, the same time as a conventional loan. And just about every lender that handles FHA or conventional loans also makes VA loans.
United States Department of Agricultural (USDA or Rural Development)
What is a USDA Loan?
USDA stands for United States Department of Agriculture. In the past, USDA Loans were considered "farm loans", mostly used to purchase properties in agricultural areas. That is not the case with today's USDA Loans. In fact, properties in almost every area of the country outside major metropolitan areas can be purchased with a zero-down USDA Loan today. A USDA loan provides low-cost insured home mortgage loans that suit a variety of options.
USDA Rural Loans Require No Monthly Mortgage Insurance
A distinct advantage of a USDA rural loan, as compared to a conforming loan, is great interest rates and no mortgage insurance (PMI). The daily USDA mortgage rates are usually comparable to a conforming 30-Year Fixed loan.
USDA Mortgages Require No Down Payment
USDA Mortgages have no down payment requirement. Other loan programs don't allow this. Are you curious what the minimum down payment is for an USDA Rural Loan? USDA Loans require NO down payment and they allow for the closing costs, escrow and even repairs to be included in the loan amount (appraisal permitting).
Maximum Loan Amount: The is no set maximum loan amount allowed for an USDA Residential Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. In addition, the home you are purchasing must be in an eligible geographical area.
Maximum financing: The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA loan guarantee fee).
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"Our Loan Officer and Loan Processor were great to work with, they were pleasant and helpful" - Mr. & Mrs. Pulliam
"The staff went up and above any of our expectations. Explaining everything step by step, very professional and helpful" - Dale Gohn & Kristie Tickle
"As a first time home buyer I was very unclear on what was involved in applying for a mortgage and what points and closing costs really were. Grand Oak Mortgage Company took the time to explain and educate me and my wife on the entire mortgage process" - Mr. & Mrs. Zlotnik
"Thank You Grand Oak Mortgage, my loan experience was all that you said it would be, fast and hassle-free" - Mr. & Mrs. Babcock
"Grand Oak Mortgage was great to deal with. Everytime, I spoke with them they were very upbeat and happy. It was a real pleasure dealing with such a great staff. They were very patient with me even when they had to explain things to me twice" - Mr. Passalacqua
"My Loan Officer was very helpful and all for us, she gave us insight into the ins and outs of the business" - Mr. & Mrs. Gonzalez
"Grand Oak Mortgage was very helpful, we want to thank them for getting us in our house. Very good company, who cares about their clients" - Mr. Zak
"With all the different loans programs available I didn't know the best program for me. With the help of my Grand Oak Mortgage Company Loan Officer I ended up with a loan program that saved me nearly $100/month on my house payment" - Mr. & Mrs. Wink
"The staff went up and above any of our expectations. Explaining everything step by step, very professional and helpful" - Dale Gohn & Kristie Tickle
"As a first time home buyer I was very unclear on what was involved in applying for a mortgage and what points and closing costs really were. Grand Oak Mortgage Company took the time to explain and educate me and my wife on the entire mortgage process" - Mr. & Mrs. Zlotnik
"Thank You Grand Oak Mortgage, my loan experience was all that you said it would be, fast and hassle-free" - Mr. & Mrs. Babcock
"Grand Oak Mortgage was great to deal with. Everytime, I spoke with them they were very upbeat and happy. It was a real pleasure dealing with such a great staff. They were very patient with me even when they had to explain things to me twice" - Mr. Passalacqua
"My Loan Officer was very helpful and all for us, she gave us insight into the ins and outs of the business" - Mr. & Mrs. Gonzalez
"Grand Oak Mortgage was very helpful, we want to thank them for getting us in our house. Very good company, who cares about their clients" - Mr. Zak
"With all the different loans programs available I didn't know the best program for me. With the help of my Grand Oak Mortgage Company Loan Officer I ended up with a loan program that saved me nearly $100/month on my house payment" - Mr. & Mrs. Wink
*We are proud to announce that all of our Loan Officers are S.A.F.E. act compliant.
