HOME LOAN PROGRAMS

CONVENTIONAL 
HOME LOAN

A conventional loan is one that is not insured or backed by the federal government, although it might be insured by a Private Mortgage Insurance (PMI) company. This distinguishes it from other types of home loans that are insured by the government in some way, such as VA and FHA loans. Recently, several new, conventional loan programs have been introduced (Homeready and Homepossible, e.g.) that feature down payments as low as 3% to 5%. Qualification standards are typically stricter for conventional loans, as compared to government-backed financing, which is why many borrowers who are eligible flock to government programs such as the FHA loan. Generally speaking, the government-insured products are easier to obtain, especially for borrowers with smaller down payments and/or credit problems.

JUMBO
HOME LOAN

A jumbo loan, also known as a jumbo mortgage, is a form of home financing for an amount that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). As a result, unlike conventional mortgages, it is not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac. Designed to finance luxury properties and homes in highly competitive local real estate markets, jumbo mortgages come with unique underwriting requirements and tax implications.

While jumbo mortgages used to carry higher interest rates than conventional mortgages (because of the greater amount of money involved and because it can take longer to sell a higher-priced home if the lender must foreclose), that gap has been closing in recent years. Today, the average annual percentage rate (APR) for a jumbo mortgage is often par with conventional mortgages – and in some cases, even lower.

On the even brighter side, down payment requirements have loosened over the same time period. In the past, jumbo mortgage lenders often required home buyers to put down 30% of the residence’s purchase price, compared to 20% in conventional mortgages. Today, that figure has fallen to as low as 10-15%.

FHA 
HOME LOAN

If you’ve been researching your mortgage options online, you’ve probably already heard about FHA loans, which is but one of the government-backed programs. They are one of the most popular types of mortgage loan products among home buyers, particularly first-time buyers. This program falls under the Department of Housing and Urban Development (HUD) and is administered by the Federal Housing Administration (FHA).

VA
 HOME LOAN

The VA loan program is another example of government-backed mortgage financing. These loans are generated in the private sector by regular lenders, but are guaranteed by the Veterans Administration or VA, at least in part. This program is generally limited to military service members and their families. The primary advantage of this program is that it offers 100% financing. Qualified borrowers who use a VA loan to buy a house can finance 100% of the purchase, with no down payment, making the program unique versus others. Along with the USDA program, this is one of the only options for 100% financing.

USDA
HOME LOAN

USDA loans also provide 100% financing for qualified borrowers, but they are limited to only to low- and moderate-income borrowers in designated rural areas. The full name of this program is officially the USDA Rural Development Single-Family Housing Guaranteed Loan Program, also referred to as rural housing loans. According to a HUD fact sheet, this program “is designed to serve rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.” Eligible borrowers can use this type of home loan to “acquire modestly priced housing for their own use as a residence through the purchase of a new or existing dwelling or the purchase of a new manufactured home.”