Conventional mortgages are loans that aren’t guaranteed or insured by the federal government. Also known as a conforming mortgage, the conventional loan complies with the parameters set by Freddie Mac and Fannie Mae. You may obtain either an adjustable or fixed rate while your maximum loan amount is determined by the county and state of the home. The 2022 Conventional loan limit is $647,200.
A Conventional mortgage can benefit an individual whether they are a first-time buyer or in the process of refinancing. This loan option has a minimum down payment of 3% and typically requires a 620 credit score.
The Federal Housing Administration offers loans for existing or new home purchases as well as programs for home repairs. The FHA is a government agency inside the U.S. Department of Housing and Urban Development. An FHA loan is a type of mortgage that is insured by the Federal Housing Administration. Borrowers are required to pay for mortgage insurance so the lender is protected from a loss if the borrower happens to default on the loan itself. An FHA loan has a minimum down payment of 3.5%.
The VA loan is an unmatched home loan for veterans, service members, and military families. There are many benefits to the VA loan, such as:
The VA loan features competitive rates and terms while allowing qualified borrowers to purchase a home with little to no money out of pocket. Service-connected disabled Veterans are also exempt from the VA funding fee.
VA mortgages are labeled as the best mortgage option for eligible veterans or active duty military personnel looking to buy a home.
A down payment is the amount of your own money that you put towards the house right away. It’s an upfront payment that determines how much your principal will be.
APR is the annual cost of a loan to a borrower — including fees. The APR is expressed as a percentage. Unlike an interest rate, it includes other charges or fees such as mortgage insurance, most closing costs, discount points, and loan origination fees.
Closing costs and Prepaids come from a myriad of transactions that occur during the mortgage process. Loan costs include any origination fees, the appraisal, and the title work typically done by an attorney. Other costs include prepaid such as your first year of homeowner’s insurance. Typically, closing costs calculate out to be around 3-5% of the purchase price of the home.
Sellers can offer to cover the closing costs during negotiations.
Yes, until the funding of your refinance is done, you still are required to make your mortgage payments. All refinances have a 3-day waiting period after closing before they fund called a Right of Rescission. This was established by the Truth in Lending Act and gives the borrower the ability to cancel the loan within that time frame.