Mortgage Loan Programs

MORTGAGE LOAN PROGRAMS OFFERED BY HOMESERVICES LENDING

This is to serve as a resource, describing the main loan programs offered by HomeServices Lending, including Conventional, FHA, VA, USDA Rural Housing, Jumbo, and any Specialty Programs.

This information has been provided courtesy of Mortgage Loan Specialist, Andy Clevenger.

 

The loan programs differ in the “qualifying” guidelines, maximum loan amounts, minimum down payment requirements, credit analysis, etc.

What follows is a list of each loan program’s unique characteristics.


Conventional:

  • Administered by Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac)
  • Minimum 5% down
  • $417,000 maximum loan amount
  • Minimum borrower investment of 5% of own funds (not gifted), waived with 20% down payment
  • Debt ratio typically limited to 45% (house payment-only ratio should be in the low 30s)
  • Private Mortgage Insurance required on any single loan greater than 80%. Cost increases with higher loan to values (85%, 90%, and 95%). PMI will remain until loan amount reaches 78% of original value
  • More strict with credit score requirements
  • Seller can pay closing costs up to 3% of purchase price on 95% loans, 6% on 90% loans, and 9% on 80% loans
  • Post closing liquidity (reserves) of 2 months is typically required
  • A relatively quick process from start to finish, with “start” defined as the receipt of a full application and all borrower’s documentation

FHA:

  • Administered by Housing and Urban Development loan (HUD)
  • Minimum 3.5% down
  • Maximum loan amounts vary by county: for example, Wake/Johnston/Franklin: $295,000; Durham/Orange/Chatham: $334,650
  • Fixed rates and ARMs are available
  • No minimum borrower investment. Down payment and closing costs can be 100% gifted from immediate family member/domestic partner
  • Debt ratios typically limited to 50% but can exceed based on borrower’s credit profile and file attributes
  • FHA typically charges two forms of mortgage insurance: 1% fee that is non-refundable, paid in cash or financed into the loan, and an annual premium (0.90% per year), collected monthly, that lasts a minimum of 5 years and ceases when loan amount reaches 78% of the original value.
  • Less strict with credit score requirements
  • Seller can pay up to 6% of purchase price towards settlement costs
  • Post closing liquidity (reserves) depends on file quality. None to two months worth of payments are common
  • Typically a quick process but usually is slower due to slightly higher documentation requirements per FHA guidelines.

VA:

  • Administered by the Veterans Administration
  • Fixed rates and ARMs are available
  • 0% down
  • $417,000 maximum loan amount, subject to Veteran’s eligibility
  • Rates are typically equal to FHA rates
  • Closing costs can be 100% gifted
  • Debt ratios typically limited to 41%, higher with compensating factors (VA looks at net residual monthly income relative to family size, among other things)
  • VA charges a non-refundable VA funding fee, amount relative to Active Duty/Veteran or Reservist/National Guard, first-time or subsequent use, etc., that can be financed in the loan. First time Veteran VA funding fee for 100% financing is 2.15% (less with higher down payments). There is no monthly mortgage insurance expense associated with VA loans.
  • Seller can pay up to 4% of the purchase price towards settlement costs
  • No post-closing liquidity is typically required but can often help in an otherwise weak loan file

USDA/Rural Housing:

  • Administered by the US Department of Agriculture
  • Fixed rates only
  • Up to 100% financing for eligible properties, determined by VA relative to census tracts. Designed to assist in “rural” financing in outlying areas.
  • Income limits relative to Rural Development median income limits per county (i.e. Wake County limit is $89,350 max household adult income, family size up to 4)
  • Debt ratio typically is max 29% of income towards house payment with a maximum 41% total debt (house + credit)
  • USDA charges 3.5% Rural Housing Guarantee Fee that can be financed in the loan

Jumbo:

  • Typically these loans are shelved by the lender or are sold to a relatively small secondary market
  • Any single loan amount that exceeds conventional financing limit of $417,000 is considered a Jumbo loan
  • Fixed rates and ARMs
  • Up to $2,000,000
  • Rates are typically slightly higher than Conventional
  • Many borrowers opt for a $417,000 conventional 1st mortgage coupled with a 2nd (home equity line or fixed rate), typically up to a maximum of 90% (harder to find these days). The “blending” of the 1st and 2nd rates are often better than that of a single Jumbo rate
  • Typically 80% maximum loan to value (currently no mortgage insurance is available for jumbo loans which limits the LTV to 80%)
  • Debt ratios are strict and depend on loan file attributes
  • Post closing liquidity (reserves) of 10% or more, depending on loan amount size (liquid, cannot include retirement accounts)
  • Seller can typically pay up to 6% of the purchase price towards settlement costs
  • Typically a quick process but appraisals typically take a little longer to complete due to lack of comparables and underwriting is more “manual” than conventional loans.

Specialty Programs:

  • Community Development Mortgage Program (CDMP)
  • 30-year fixed rate only
  • 2% down
  • No PMI
  • $417,000 maximum loan amount
  • Up to 2 units (landlord counseling required for duplexes)
  • Income limited to 80% of HUD median income for county (waived if certain criteria are met)
  • Homebuyer education required (waived if own home in last 3 years and most recent 12 month mortgage/rental history reflects no late payments or adverse credit)
  • 42% maximum debt ratio
  • Non-occupant co-borrower can be a parent and parent’s income is not counted in the income limitation
  • 620 minimum credit score (680 for special cases)
  • Seller can pay up to 3% of the purchase price towards settlement costs
  • Typically the slower process of them all but usually because of the homebuyer education process

This information should only be used as a general reference guide and does not represent an exhaustive list of program parameters and underwriting criteria. Contact us and we’re happy to refer a trusted Mortgage Loan Specialist for you.