Types of Loans

There are many types of mortgages out there although they have been reduced since the housing boom. Each type is differentiated by the requirements the borrower and/or property must meet to qualify for the loan. The world of mortgages is summarized as follows:

FHA stands for Federal Housing Administration Loans. These loans are insured by the US Government and have very flexibile qualification practices (lower credit scores, shorter waiting periods following BKs, short sales, low down payments). For the ability to have this flexibility, the borrower will pay Mortgage Insurance (MI), in many cases until they refinance or sell the property. Within FHA, we have USDA and VA loans which have there own set of qualifications but carry additional benefits not found in normal FHA loans.

Conventional refers to any loan that conforms (within the rules) to the guidelines set by Fannie Mae or Freddie Mac. Any conforming loan with less than 20% equity will have some type of Private Mortgage Insurance attached to it. Loan amounts less than $417,000 in California as said to be Conforming loans while those between $417,001 and $620,000 are considered high balance conforming loans.

Any loan above $620,001 is said to be a Jumbo loan. This means that there is no governmental agency that sets the guidelines for these types of loans. In essence they are loans made by lending institutions who devise their own criteria for these loans. These loan programs can vary greatly.

VA helps Service members, Veterans, and eligible surviving spouses become homeowners. As part of their mission to serve you, they provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

For information on program assistance, including direct or guaranteed loans, grants, technical assistance, research and educational materials, visit the USDA Rural Development Website.