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Mortgage Programs

Suburban Family Home

Conforming Loans

A conforming mortgage is a one that follows the guidelines of Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages on the secondary market and package them as mortgage-backed securities. Once banks sell their mortgages to Fannie and Freddie, they in turn lend more money to home buyers from the proceeds.

For Fannie and Freddie to buy or guarantee a mortgage, the loan must meet certain requirements. Those requirements include the borrower’s loan-to-value ratio, debt-to-income ratio and credit score.

Even so, the most important guideline is the limit on the size of the loan, an amount reset late last year by the Federal Housing Finance Agency, which regulates Fannie and Freddie. It was the first time the conforming loan limit was changed since 2006.

As of November 2016, the mortgage limit for a typical home is $424,100. Still, the agency allows a larger maximum mortgage in areas with a high cost of living. Those mortgages that exceed the limit set for that particular area are called jumbo loans.

Country Manor

Jumbo Loans

Home prices have shot up in some areas of the U.S. to the point where buyers need jumbo loans to finance them. In mortgage speak, jumbo refers to loans that exceed the limits set by the government-sponsored enterprises that buy most home loans and package them for investors.

Jumbo mortgages, or jumbo loans, are those that exceed the dollar amount loan-servicing limits put in place by GSE’s Freddie Mac and Fannie Mae. This makes them non-conforming loans.

As of 2018, these limits are $453,100 in all states except for Alaska, Guam, Hawaii, and the U.S. Virgin Islands where the limit is $679,650. The conforming limit is higher in counties with higher home prices, so be sure to check your area’s loan limits.

Buying a House

FHA Loans

The FHA is a federal agency, formed as part of the National Housing Act of 1934. Since its inception, the FHA has insured more than 34 million mortgages, providing the necessary security that lets lenders offer their borrowers a better deal. Although there are limits on the amount the FHA will insure, FHA-backed loans could mean down payments as low as 3.5 percent and competitive rates.

FHA loans are available through approved FHA lenders. They are a good choice low-income borrowers or those who have bad credit, because it’s possible to qualify with a credit score as low as 500 and sometimes even after bankruptcy or foreclosure. The fees usually associated with mortgages, like closing costs and insurance fees, are also typically lower with an FHA loan.

Many FHA loans don’t have a minimum income requirement. In considering a consumer’s eligibility for an FHA loan, the agency looks at the cost of the mortgage, the borrower’s ability to pay on time and her debt-to-income ratio, and the cost of housing in the borrower’s area. That makes eligibility less about income and more about the borrower’s net financial obligations.

US Army Soldier in Universal Camouflage

VA Loans

A VA loan is a mortgage loan that is backed by the U.S. Department of Veterans Affairs. These loans are available to people who are actively serving in the military or who have served and received an honorable discharge. Family members of service personnel also may qualify for a VA loan.

VA loans make it easier for veterans to obtain the financing to buy a house. If the borrower defaults on the loan, the lender files a claim with the VA, and the VA provides a settlement. There are limits, however, on how much liability the VA will assume, which can affect the amount of money a mortgage lender will give a VA loan borrower.

Still, VA loans offer borrowers a number of key benefits, such as:

  • No down-payment requirement.

  • Lower interest rates.

  • The ability to borrow as much as 100 percent of the home’s value.


VA loans are available through approved lenders, and there are many mortgage lenders that are approved to give VA loans. The VA does not loan the money. Borrowers must meet the eligibility requirements of the VA and the mortgage lender.

Home Owners

First Time Home Buyer Loans

Buying your first home is likely to be one of the largest financial decisions you will ever make, and so it’s a very good idea to do your research and understand all of your options before leaping in.

As with all forms of credit, when buying your first house you generally want to borrow as little as possible. When it comes to mortgages specifically, there are three ways to do that:

  • Save up a large deposit. Most banks and building societies will offer first-time buyers a 95% loan-to-value (LTV) mortgage – that is, you only need to provide a deposit of 5% and they’ll provide the rest – but a larger deposit will usually give you access to better mortgages with lower interest rates.

  • Don’t buy more than you can afford. It goes without saying, but you shouldn’t bite off more than you can chew. If you find yourself spending more than 40% of your income on mortgage repayments you might become “house poor.”

  • Use a government scheme such as Help-To-Buy, or Shared Ownership. Many newly built homes are now available through Help-To-Buy – a government scheme that covers up to 20% of the cost of the home. So, for example, with a 5% deposit, you’d only need a mortgage for 75% of the home’s cost. Shared Ownership, which is likewise available on some new builds, is even easier: you buy a portion of the home (usually 25% to 75%), and the rest is usually owned by a housing developer or local authority. This means you can get on the property ladder with a very small mortgage and deposit – and then increase your share of ownership over time.


Before you go hunting for your first home, it’s a good idea to work out how much you can borrow. At the most basic level, assuming a deposit of around 5 to 20%, banks and building societies will usually offer up to four or four-and-a-half times your gross annual earnings. A larger deposit might give you access to mortgages that are five times your gross annual earnings.

Most lenders will also take into account the “affordability” of the mortgage. If you already have a lot of outgoing money – a car loan, credit card bills, etc. – then the bank or building society might not be willing to lend you as much money. Affordability also takes into account whether you’d still be able to repay your mortgage if the interest rate goes up considerably.

Finally, your credit score and history will affect how much the bank or building society is willing to lend you. If you’ve had bad debts in the past, you might be charged a higher rate of interest – or you might simply be turned down.


Commercial Loans

A commercial real estate loan is a mortgage loan secured by a lien on commercial, rather than residential, property. Commercial real estate (CRE) refers to any income-producing real estate that is used solely for business purposes, such as retail centers, office complexes, hotels and apartments.

Typically, an investor (often a business entity) purchases commercial property, leases out space, and collects rent from the businesses that operate within the property. Financing, including the acquisition, development and construction of these properties, is typically accomplished through commercial real estate loans. Commercial real estate loans are typically made to business entities formed for the specific purpose of owning commercial real estate. Entity types include corporations, developers, partnerships, funds, trusts, and real estate investment trusts or REITs.

Like residential loans, banks and independent lenders are actively involved in making loans on commercial real estate. In addition, insurance companies, pension funds, private investors and other capital sources, including the U.S. Small Business Administration’s 504 Loan Program, make loans for commercial real estate. And, like residential lenders, various commercial lenders have different levels of risk that they will undertake. As a result, lenders have different terms they are willing to offer to borrowers.

While the most popular residential loan is the 30-year fixed-rate mortgage, the terms of commercial loans typically range from five years (or less) to 20 years, and the amortization period is often longer than the loan term. For example, a lender might make a commercial loan that is for a term of seven years with an amortization period of 30 years. This means that the borrower makes monthly payments during the seven years, in an amount determined as if the loan were being paid off over 30 years, followed by one final “balloon” payment of the entire remaining balance on the loan.

When evaluating commercial real estate loans, lenders consider the loan’s collateral, the creditworthiness of the entity (or principals/owners), including three to five years of financial statements and income tax returns; and financial ratios, such as the loan-to-value ratio and the debt-service coverage ratio.

Contract Paper Signing

Private Money Loans

A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans, because of the higher risk and shorter duration of the loan.

Most hard money loans are used for projects lasting from a few months to a few years. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.

The loan amount the hard money lender is able to lend is determined by the ratio of loan amount divided by the value of property. This is known as the loan to value (LTV). Many hard money lenders will lend up to 65–75% of the current value of the property.

"Hard money" is a term that is used almost exclusively in the United States and Canada, where these types of loans are most common. In commercial real estate, hard money developed as an alternative "last resort" for property owners seeking capital against the equity in their real estate holdings. The industry began in the late 1950s when the credit industry in the U.S. underwent drastic changes.

From inception, the hard money field has always been formally unregulated by state or federal laws, although some restrictions on interest rates (usury laws) by state governments restrict the rates of hard money such that operations in several states, including Tennessee and Arkansas are virtually untenable for lending firms.

The hard money loan mortgage market has greatly expanded since the 2009 mortgage crisis with the passing of the Dodd-Frank Act. The reason for this expansion is primarily due to the strict regulation put on banks and lenders in the mortgage qualification process. The Dodd-Frank and Truth in Lending Act set forth Federal guidelines requiring mortgage originators, lenders, and mortgage brokers to evaluate the borrower's ability to repay the loan on primary residences or face huge fines for noncompliance. Therefore, hard money lenders only lend on business purpose or commercial loans in order to avoid the risk of the loan falling within Dodd–Frank, TILA, and HOEPA guidelines.

Because the primary basis for making a hard money loan is the liquidation value of the collateral backing the note, hard money lenders will always want to determine the LTV (loan to value) prior to making any extension of financing. A hard money lender determines the value of the property through a BPO (broker price opinion) or an independent appraisal done by a licensed appraiser in the state in which the property is located.

The interest rates on hard money loans are typically higher than the rates charged for traditional business loans. The interest rates could range from 10% to 18%. Despite this, such loan options are popular for their fast approvals, higher flexibility, less tedious documentation procedures and, at times, the only option for securing funds.

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