Conventional   No Doc/Stated   FHA    VA
 

Loan programs come in many forms and come from many sources. Just as the loan structure, like a 30 year fixed rate mortgage, can affect your interest rate and monthly payments, the source of funding for your loan can also affect your rate and payments. The source of funding can also affect the amount of your down payment and closing cost.

If you have at least 5% of the loan amount to use as a down payment, you may consider the most common type of loan, a conventional loan. These loans consist of conforming loans, which are secured by government sponsored entities (GSE) such as Fannie Mae and Freddie Mac, and non-conforming “Jumbo” loans, which are funded by private investors for loan amounts higher than the limits set by the GSE's.

Conforming loans are funded by Fannie Mae (FNMA) and Freddie Mac (FHLMC). These companies do not lend money directly to you, but work with lenders across the country to offer mortgage loans to meet your needs. As a secondary market for mortgage loans, they purchase mortgages from lenders and package them into securities that can be sold to investors.

If you are looking for a large loan amount to purchase or refinance your home, you could consider a  non-conforming “Jumbo” loan, which has a higher loan amount limit than the limits set by Fannie Mae and Freddie Mac. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

The federal government and other state, local and private entities have developed programs to help you purchase a home with a low down payment. If you are a potential homebuyer that has a down payment of less than 5% or need down payment assistance, you may be eligible for a mortgage insured by the Department of Housing and Urban Development (HUD) through the Federal Housing Administration (FHA). While FHA does not make or buy loans, they insure FHA loans so that if you default on the loan, the lender will get reimbursed. You may be able to get an FHA loan with a low down payment of only 3% of the loan amount or less. While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country.

If you  are a veteran or qualify by military service or other entitlements you may qualify for a      VA Loan. FHA mortgage insurance can be combined with a guarantee from the Veteran's Administration. VA mortgages were created to help veterans achieve the American dream and buy their own homes. VA loans offer low to no down payments with many of the same benefits as an FHA loan.

If you have had credit issues, you may not qualify for a conventional, FHA or VA loan. In this case, you could consider a sub-prime loan. Like other loans, sub-prime loans come in many forms based on the terms, loan amount and loan to value ratio you are looking for. In addition companies will look at your credit and give you a credit grade, which will help them determine the best loan for your situation. With less than perfect credit, you can expect to pay higher interest rates because of the higher risk associated with making a loan to someone with a poor credit history.

CONVENTIONAL
Conventional, Conforming and Non-Conforming (Jumbo) Loans
Conventional-Conforming Loans are secured by government sponsored entities or GSE's such as Fannie Mae and Freddie Mac or by private investors for loan amounts higher than the limits set by the GSE's. Conventional-Conforming loans can be made to purchase or refinance homes with first and second mortgages on single family to four family homes.

In general, Fannie Mae and Freddie Mac's single family, first mortgage loan limit is $333,700 in 2004. This limit is reviewed annually and, if needed, changed to reflect changes in the national average price for single family homes. The current loan limit applies to all conventional mortgages delivered after January 1, 2004. The loan limit was $322,700 for single family homes in 2003.

2004 Conventional Loan Limits:
First mortgages:

• Single Family loans: $333,700
• Two Unit loans: $427,150
• Three Unit loans: $516,300
• Four Unit loans: $641,650

Note: Maximum original loan amounts are 50 percent higher for first mortgages on properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands.

Non-Conforming or Jumbo loans have loan amounts which are larger than the limits set by Fannie Mae and Freddie Mac. Because jumbo loans are not funded by these government sponsored entities, they usually carry a higher interest rate, typically a 1/4 to 3/8’s higher and some additional underwriting requirements.

 A strategy to lower your overall interest payments if your purchase or refinance balance is above $333,700 is to use a combination of both first and second trust money, referred to as an 80/10/10, 80/15/5 or 80/20. Every situation is different, but it is one more option to consider.

In addition to common loan structures such as fixed rate, adjustable rate and balloon loans, Fannie Mae and Freddie Mac also have loan programs for low to no down payments, community lending and affordable housing initiatives, construction to permanent, home improvement and reverse mortgages.

NO DOC / STATED

Coming Soon

FHA LOANS

The FHA does not make loans. It insures, in the event of a default, mortgage loans made by approved lending institutions. FHA's analysis of the transaction takes into consideration the applicant's income, past credit history, work history and ability to save and manage financial affairs. Each applicant is considered individually as no two families have exactly the same situation. Family obligations, responsibilities, future prospects, motivation and spending patterns all differ widely.

Advantages of FHA Loans

• Low down payment
• Less cash from borrower than a conventional loan
• Less stringent loan underwriting guidelines
• Fully assumable (with qualifying)
• No prepayment penalty
• Eligibility Requirements
• FHA financing may be by any qualified person, whether a U.S. citizen or not. However, the property must be the occupying borrower's principal residence. The borrower must also have a social security number.

FHA Mortgage Insurance
Mortgage insurance is required on all FHA loans. The insurance is collected by the lender and paid to FHA, who in turn reimburses lenders in the event of loan defaults. MMI & MIP are the two existing types of FHA insurance.

MMI (Mutual Mortgage Insurance) is collected monthly on approved Condominiums. Insurance is paid on the remaining balance of the loan only, therefore the payments will decrease gradually over the life of the loan.

MIP (Mortgage Insurance Premium) is a one-time premium calculated as a percentage of of the loan amount that applies to Single Family Residences (SFR) and Planned Unit Developments (PUD). This fee can be 100% financed and added to the base loan.

FHA Loan Programs And Amounts
The maximum FHA loan amount is currently set at $234,150.

Three programs are available; the 15 or 30 year fixed/level payment where the monthly principle and interest payment remains the same for the life of the loan, the one-year ARM (Adjustable Rate Mortgage) which can fluctuate based on the index (1-year Treasury Bill) and has a 1% annual cap and a 5% lifetime cap, and the buy-down which allows the borrower to qualify at a lower rate but requires a down payment.

Interest Rates
FHA does not set interest rates. Rates reflect current market conditions. Discount points need not be paid by anyone, but discount points to obtain a lower than market rate can be paid by either the buyer or the seller.

FHA Appraisals
FHA uses the same appraisals for all programs. The appraisals (or Conditional Commitments) are done by FHA assigned/approved appraisers and set forth FHA's estimate of value. If the appraisal is at a value lower than requested, a reconsideration of value may be requested by sending FHA recent comparables indicating a higher value, or the buyer may pay the additional difference.

Co-Signers
FHA allows a borrower to use a non-occupying co-signer for purposes of qualifying for the loan. The co-signer's income, assets, liabilities and credit history are included in the determination of credit worthiness. The co-signer must be a blood relative, or for unrelated individual, documented evidence of a family-type, long-standing and substantial relationship not arising out of the loan transaction.

Buyer's Costs

• Down Payment
• Loan Origination Fee (1% of base loan amount)
• Escrow Fee
• Appraisal Fee
• Credit Report Fee
• Recording Fees
• ALTA. Lenders Title Insurance Policy
• Property Tax Pro-ration and Reserves
• MIP (can be 100% financed and added to base loan)
• Hazard Insurance and Reserves
• Per Diem interest on new loan, based on closing date

Seller's Costs

Escrow Fees
Sub-Escrow Fee*
Tax Service Fee*
Revenue Tax Stamps
Standard Owner's Title Insurance Policy
Proration of Property Taxes
Payment of assessments, etc.
Structural Pest Control Inspection and Repairs
Pay Off Existing Trust Deed and Liens
Broker fees
Association Transfer Fees*
Buyers' Loan Processing Fee*

And Don't Forget...
The Down payment must be paid from the buyer's own funds or can be a gift from a relative. FHA does not allow the buyer to pay certain costs and therefore those costs must be paid by the seller (see * items under Seller Costs above).
 

VA LOANS

What Is A VA Loan?
The Veterans Administration (VA) does not make loans. VA guarantees that the lender will be protected against loss in the event of a foreclosure up to a maximum of 25% of the loan amount. A funding fee is paid by the veteran to the Veterans Administration for each loan. VA will guarantee a loan for any eligible veteran to purchase a home provided his income will permit him to make the mortgage payments, his credit history is acceptable and he has enough cash to close the loan without borrowing.

Advantages Of VA Loans

• No down payment required if the purchase price of the property does not exceed the VA appraisal.

• The seller may pay any or all of the veteran's costs.

• Less stringent loan underwriting requirements versus other types of loans.

• Fully assumable (with qualifying).

• No prepayment penalty.

Eligibility Requirements
To be eligible for a VA loan, the veteran must have served in the Armed Forces of the United States of America for a specified amount of time. The length of service required varies based upon the period of time he or she has served. The veteran should have also been discharged under conditions other than dishonorable.

Sept. 16, 1940 to July 25, 1947 - 90 days
July 25, 1947 to June 27, 1950 - 181 days
June 27, 1950 to Jan. 31, 1955 - 90 days
Jan. 31, 1955 to August 5, 1964 - 181 days
August 5, 1964 to May 7, 1975 - 90 days
May 7, 1975 to Sept. 7, 1980 - 181 days
Sept. 7, 1980 to Present - Two years
Currently in service - 181 days

Also eligible are unmarried widows of qualifying veterans whose deaths were service related. There are some exceptions to this schedule. Please contact your local BANCGROUP branch and speak to a loan officer to help make a determination of eligibility.

VA Loan Programs And Amounts
The maximum VA loan amount is currently set at $300,700.

The one program available is a 30-year fixed/level payment where the monthly principle and interest payment remains the same for the life of the loan.

VA Appraisals
All VA appraisals are done by VA assigned/approved appraisers. A Certificate of Reasonable Value (CRV) is then issued, setting forth VA's estimate of value.

Eligibility Restoration Criteria
The assumption of a VA loan leaves the veteran with limited eligibility until the loan is paid off in full as a result of an actual sale. Eligibility may then be completely restored and another property purchased using full entitlement.

Co-Mortgagors
If a veteran is legally married, VA will consider the spouse's income. If the veteran is to be married and the spouse's income is being used to qualify, VA will approve the loan with a marriage certificate as a condition for closing. All other co-mortgagors must meet the following requirements: (a) Both must be veterans. (b) Both will occupy the property. (c) Both will use their entitlements. (d) Both must qualify for 1/2 of the payment.

Buyer's Costs

• NO DOWN PAYMENT REQUIRED

• Loan Origination Fee (1% of loan amount)

• VA Funding Fee (varies and can be 100% financed)

• Credit Report

• Appraisal Fee

• ALTA. Lenders Title Insurance Policy

• Property Tax Pro-ration and Reserves

• Hazard Insurance and Reserves

• Interest on new loan, based on closing date

• Recording Fees

Seller's Costs

• Sellers' and Buyers' Escrow Fees

• Revenue Tax Stamps

• Standard Owner's Title Insurance Policy

• Sub-Escrow Fee

• Tax Service

• Pay Off Existing Trust Deed and Liens

• Pro-ration of Property Taxes

• Payment of assessments, etc.

• Structural Pest Control Inspection and Repairs

• Other repairs or the cost of repairs

• Broker fees

• Association Transfer Fees

• Buyers' Loan Processing Fee

And Don't Forget...
In a VA sale, the seller may pay any or all of the Veteran's costs listed above. This means that the veteran could buy with absolutely no money out of pocket. UNDER NO CIRCUMSTANCES CAN THE VETERAN PAY ANY OF THE SELLER'S COSTS. Discount points need not be charged to anyone, but the discount points to obtain a lower market interest rate can be paid by either the seller or the buyer.