Understanding Products

All mortgage plans can be divided into categories

Conventional Loans and Government Loans.
 
Additionally, either  category of loan may have different classifications

Classifications may be:
(1)  Fixed rate loans
(2)  Adjustable rate loans, and 
(3)  Combinations -- fixed for a period of time then becoming adjustable.

CATEGORIES OF LOANS:

CONVENTIONAL LOANS

Any mortgage loan other than an FHA, VA or an RHS loan is conventional one.

GOVERNMENT LOANS

FHA Loans
The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit. Go to FHA Programs page to get more information.

VA Loans

If you are looking for an FHA home loan right now, please feel free to request personalized rate quotes from HUD-approved mortgage lenders via our website.

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without 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 determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

VA-guaranteed loans are obtained by making application to private lending institutions. If you are interesting in obtaining a VA-guaranteed loan you can try our VA loan request form.

Please also see pamphlets published by VA.

RHS Loan Programs -- USDA

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no down payment. Visit our page RHS programs for details.

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. Securities are sold through financial institutions that trade government securities.

State and Local Housing Programs

Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. Also, there are often loan assistance programs offered at the local or state level such as MCC (Mortgage Credit Certificate) which 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.

Conforming Loans
Conventional loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying 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 results in the availability of mortgage credit for Americans.

Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announces new loan limits every year.

The 2007 conforming loan limits for first mortgages remain at the limits set in 2006:

• One-family - $417,000
• Two-family - $533,850
• Three-family - $645,300
• Four-family - $801,950

CLASSIFICATIONS OF LOANS:

Fixed Rate Mortgages
With fixed rate mortgage loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you could get.

The most popular mortgage terms are 30 and 15 years, although newer products also offer 40 and 50 year terms! With the traditional 30-year fixed rate mortgage your monthly payments are lower than they would be on a shorter term loan. But if you can afford higher monthly payments a 15-year fixed-rate mortgage allows you to repay your loan twice as fast and save more than half the total interest costs of a 30-year loan.

Adjustable Rate Mortgages (ARMs)
Variable or adjustable loan is loan whose interest rate, and accordingly monthly payments, fluctuate over the period of the loan. With this type of mortgage, periodic adjustments based on changes in a defined index are made to the interest rate. The index for your particular loan is established at the time of application.

Well known ARM indexes include:

• Constant Maturity Treasury (CMT)
• Treasury Bill (T-Bill)
• 12-Month Treasury Average (MTA or MAT)
• Certificate of Deposit Index (CODI)
• 11th District Cost of Funds Index (COFI)
• Cost of Savings Index (COSI)
• London Inter Bank Offering Rates (LIBOR)
• Certificates of Deposit (CD) Indices
• Bank Prime Loan (Prime Rate)
• Fannie Mae's Required Net Yield (RNY)
• National Average Contract Mortgage Rate