Which Loan Type Is Right For me? FHA, USDA, VA, Conventional, Jumbo, HARP Home Loans - www.GoSkylineDirect.com

Which Loan Type Is Right For me?



Which loan type is right for me?

FHA, VA, USDA, Conventional, HARP, Fixed Rate, Adjustable Rate, Reversible Mortgage? There are many different loan products on the market to help buyers purchase or refinance their home. We've summarized the most popular loan types available to guide you through determining a loan product that meets your needs.


What is a Conventional and / or Conforming Loan?

Single-family mortgage amounts equal to or under the loan amount of $417,000, (Known as the conforming limit in the Continental United Sates) are often called “conventional” or “conforming” loans and are available for purchase by Fannie Mae and Freddie Mac.

Credit qualifications and underwriting guidelines are generally more stringent on a conventional loan. Conventional loans normally require a down payment of 20%, but private mortgage insurance can be purchased if less money is applied as a down payment.

Conventional loans will not allow you to finance closing costs, however, common practice is to request the seller to pay towards your closing costs. Conventional loan programs will allow up to 3% seller credit for closing costs on 5% down payment.

Some of the other benefits of conventional loans are as follows:

  • Down payment can be as low as 5%-15% with PMI.
  • No upfront Mortgage Insurance.
  • No Private Mortgage Insurance premium is required with a 20% down payment.
  • More stringent underwriting/approval guidelines are rewarded by lower rates than with FHA loans.
  • Standard options of fixed terms are available: 10 year, 15 year, 20 year, 25 year and 30 year.
  • A variety of adjustable rate options are available where payments remain the same for an initial period of 3, 5, 7, or 10 years, then adjusted annually.

Conventional Loan Debt-To-Income Qualifying ratios:

  • 31% (house) & 43% (house & all credit debt)

Note: The ratios are the minimum standard, in many cases higher ratios are being approved by automated underwriting.

Example: If you make $1,000 before taxes (gross income), your maximum house payment can be $310 (31%) per month, with your maximum house payment plus other credit debt payments not exceeding $430 (43%) per month

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is a FHA Loan?

FHA loans are government insured loans and are backed by the Federal Housing Administration, a division of the Department of Housing and Urban Development (HUD). The FHA does not actually loan money but it does provide lenders insurance against a potential loss by issuing a mortgage insurance premium (MIP) if the borrower defaults on his or her loan.

FHA loan programs are designed to help everyone. A FHA home loan program can be helpful to you if you want to buy a home but have less than the 20% down payment conventional loan programs require.

In addition, a FHA loan program can be very helpful to you if you are an existing homeowner looking to refinance your home, but owe more than 80% of the homes current market value. The FHA loan program fills in the gap between conventional home loans and having no loan available. The rates on FHA loans are very stable and competitive even though they allow lower down payments and less equity. However, all FHA loans require a mortgage insurance premium (MIP).

Some of the other benefits of FHA financing:

  • Only requires a 3.5 percent down payment.
  • Down payment can be gift from relatives. (No expectation of repayment)
  • Closing costs can be financed only when re-financing.
  • Up front & monthly mortgage insurance.
  • Easier underwriting/approval guidelines than conventional loans.
  • Less equity is required than for most conventional loans.
  • Standard credit scores are not always required, but ability to repay is.
  • Typically allows for a higher debt to income ratio

FHA Loan Qualifying Debt-To-Income ratios:

  • 31% (house) & 43% (house and all credit debt)

Note: The ratios are the minimum standard, in many cases higher ratios are being approved by automated underwriting.

Example: If you make $1,000 before taxes (gross income), your maximum house payment can be $310 (31%) per month, with your maximum house payment plus other credit debt payments not exceeding $430 (43%) per month.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is a VA Loan?

Like FHA, VA loans are a type of government loan specifically designed for active duty Military Service members, Veterans, and eligible surviving spouses. The VA home loan can be used to buy, build, repair, or adapt a home for your own personal occupancy.

VA guarantees a portion of the loan, enabling us to provide you with favorable terms. To be eligible, you must have a good credit score, sufficient income, a valid Certificate of Eligibility (COE), and meet certain service requirements.

Here are some of the benefits of a VA loan:

  • 100% financing. No down payment as long as the sales price doesn’t exceed the appraised value.
  • No upfront or monthly private mortgage insurance is required.
  • VA funding fee may be financed into the loan or paid at closing. VA rules limit the amount you can be charged for closing costs.
  • Closing costs may be paid by the seller.
  • The lender can’t charge you a penalty fee if you pay the loan off early.
  • VA may be able to provide you some assistance if you run into difficulty making payments.
  • Must be active or retired military.
  • You don’t have to be a first-time home buyer.
  • You can reuse the benefit.
  • VA-backed loans are assumable, as long as the person assuming the loan qualifies.

VA Loan Qualifying Debt-To-Income ratios:

  • 31% to 41% (house or house/credit debt)

Note: The ratios are the minimum standard. In many cases higher ratios are being approved by automated underwriting.

Example: If you make $1,000 before taxes (gross income), your maximum house payment can be $310 (31%) per month, with your maximum house payment plus other credit debt payments not exceeding $410 (41%) per month.

Note: You must be married to count both buyer’s incomes. (Not the case with FHA and conventional loans)

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is a USDA Loan?

In 2009 the USDA enacted changes that made millions of borrowers eligible for their rural mortgage programs. Many home buyers dream of purchasing a home but don’t necessarily have the cash on hand to make the hefty 20% down payment required by a conventional home loan.

Eligible borrowers can search endlessly to find a loan program that offers more favorable terms. Loans can be up to 30 years and families with lower income and previous credit issues are not automatically disqualified.

To find out if you may qualify for a USDA loan we need to know the following:

  • What county and zip code the home resides in
  • Your current income
  • Your credit history
  • The number of dependents you can claim

USDA Loan Qualifying Debt-To-Income ratios:

  • 29% to 41% (house or house/credit debt)

Note: Higher ratios are considered with strong compensating factors including good credit scores (660+), stable employment history, potential for increased earnings, and ability to save.

Example: If you make $1,000 before taxes (gross income), your maximum house payment can be $290 (29%) per month, with your maximum house payment plus other credit debt payments not exceeding $410 (41%) per month.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is a HARP Loan?

HARP Loans Also Known As The Home Affordable Refinance Program. Nobody actually makes their monthly mortgage payment to Fannie Mae or Freddie Mac, but chances are they own your loan. You may qualify for a refinance through the HARP if your mortgage has been sold to or is owned by Fannie Mae or Freddie Mac on or before May 31, 2009. The HARP program even allows one late mortgage payment in the past 12 months. Where the HARP program has had the most success has been in helping homeowners who owe more than their home is now worth. (Often called being upside down)

You might be eligible to refinance through the Home Affordable Refinance Program. HARP loans were designed to help you get refinanced with a more stable and affordable loan. HARP refinance loans require a loan application and underwriting process, Refinance fees will apply.

You may be eligible for HARP if you meet all of the following criteria:

  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  • The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • The current loan-to-value ratio (LTV) must be greater than 80%.
  • The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is the difference in a Fixed Rate Vs. Adjustable Rate Loans?

With a fixed rate loan, your monthly payment of principal and interest never changes for the life of your loan. These loans are safe and stable. Every month the principle and interest rate of your payment will remain constant. If you have your taxes and insurance included in your payment, these items are subject to change. Fixed-rate loan terms range from: 30 year, 20 year, 15 year, even some 10 year loans are available.

If you want to shorten the loan term of any fixed rate loan, you can use a biweekly payment program to shorten the term and the effective interest rate of your loan. You pay every two weeks, a total of 26 payments a year — which adds up to an “extra” monthly payment every year.

If you don’t like surprises, you will want to choose a fixed-rate loan. Additionally, if you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you monthly payment stability.

ARMs are typically determined on outside indexes such as:

  • The 6-month Certificate of Deposit (CD) rate
  • The one-year Treasury Security rate
  • The LIBOR index (London Inter Banking Offer Rate)
  • The Federal Home Loan Bank’s 11th District Cost of Funds Index (COFI)

Adjustable Rate Mortgages also known as ARMs, come in all shapes and sizes. Usually adjustable rate mortgages are subject to adjust every six months or annually. Most loans have a cap that protects you from your monthly payment going up too much at once; including a cap on how much your interest rate can rise in one period (example; no more than two percent per year, even if the underlying index rises by more than two percent). You may also have a payment cap that controls the amount your monthly payment can rise in one period. In addition, almost all ARM programs have a lifetime cap where your interest rate can never exceed that cap amount, no matter what. Most ARMs are subject to adjust every six months or annually.

ARMs often have the lowest and most attractive rates at the beginning of the loan and can guarantee that rate for anywhere from a month to 5, 7 or 10 years. When you hear the term of a 5/1 ARM or 7/1 ARM, it means that the introductory rate is set for the first 5 or 7 years, and then it adjusts according to the used index every year after that until the loan is paid off in full. These loans are best for people who anticipate moving and/or selling their home within that specified period of time, allowing them to take advantage of the lower rate.

If you are attempting to simply get into a home, this loan may not be the right choice. With ARMs, you risk your rate going up. Beware of this loan type if your income does not increase annually as your payment can and will increase over the life of the loan.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


What is a Home Equity Loan?

Home owners, if you are considering cashing out some of your home’s equity in a second loan or equity line, let our experts evaluate your exact home equity options. Many times an equity line is not the best or cheapest way to access your equity. A new first mortgage consolidating your other debts and or cash needed into a new first loan might be a more intelligent choice.

We can provide you with a side by side comparison using our blended rate calculator to see which strategy will save you the most money. Equity lines are usually adjustable and not as secure as a fixed second. So if your re-payment time frame is unknown, it might be better to avoid the risk of an equity line and stay secure with a fixed rate second. Learning about all of your options is the key to making the right decision on a home equity loan.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


Reverse Mortgages

Reverse mortgages allow senior citizens to tap into their home’s equity without selling their home. The lender pays you money based on the equity you have in your home. You can receive a lump sum, a monthly payment or a line of credit. Repayment is not due until the borrower sells the property, moves into a retirement community or passes away.

When you sell your home or no longer use it as your primary residence, you or your estate must repay the cash you received from the reverse mortgage plus interest and other finance charges to the lender. Most reverse mortgages require you be at least 62 years of age, have a low (usually 65% or less) or even a zero balance owed against your home and maintain the property as your primary residence.

Interest rates can be fixed or adjustable and the money is non-taxable and does not interfere with Social Security or Medicare benefits. Additionally, the lender cannot take property away if you outlive your loan, nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value. Reverse mortgages are a good alternative for senior homeowners who need additional income and do not want to or cannot go back to work.

Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our best rate guarantee!


Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans. Please consult with a licensed loan officer for expert advice regarding financing or refinancing.