These are conventional loans that follow the terms and conditions established by the guidelines of Fannie Mae and Freddie Mac. Conforming loans are equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac’s and meets their funding criteria.
Types of Conforming Loans
The interest rate and the principal payments remain fixed throughout the loan. Keep in mind your monthly escrow account payment could vary from year-to-year as taxes and insurance rates change.
VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.
The FHA is a federal government agency within the U.S. Department of Housing and Urban Development.
FHA plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3.5 percent and the closing costs can be included in the mortgage amount. The FHA isn’t a lender and doesn’t directly make home loans. Instead, the FHA insures home loans against the borrower’s default to encourage lenders to offer the loans to home buyers and homeowners at more affordable interest rates.
The FHA has a special program that can help you refinance your FHA loan through a streamline process that’s easier than the typical refinancing.
Here’s a summary of what an FHA streamline refinance is, what the advantages of an FHA streamline refinance are, how an FHA streamline refinance works and what the requirements are.
FHA Refinance Loan Streamline Process
It’s important to remember that “streamline” doesn’t mean you can refinance your FHA loan without any closing costs. Instead, “streamline” refers only to the process, which involves less documentation and other requirements than a typical mortgage refinance does. For example, an FHA streamline refinance loan might not require an appraisal. That’s a major advantage if you want to refinance but believe your home has declined in value.
Though the streamline refinance isn’t cost-free, your lender may allow you to finance the closing costs through a slightly higher interest rate on your new loan. That means you won’t have to pay a lot of cash out-of-pocket to streamline refinance your existing FHA-insured mortgage. Instead, you’ll pay a higher interest rate and your FHA lender will pick up the tab for the closing costs of your streamline refinance. If you refinance into an FHA loan with a lower interest rate, you’ll still save money on your monthly mortgage payment.
Qualifying for an FHA Streamline Refinance Loan
The basic requirements for an FHA streamline refinance are:
• The mortgage that you want to refinance must be an FHA-insured loan.
• You must be current (i.e., not delinquent) on your mortgage payments.
• The primary reason why you want to refinance your FHA loan must be to lower your monthly principal and interest payment.
• You cannot tap your equity (i.e., take out cash) if you use the streamline process.
The FHA streamline refinance loan program isn’t new; in fact, the streamline process has existed since the early 1980s. An FHA-approved lender can help you get started on your FHA streamline refinance loan.
A reverse mortgage is a low-interest loan for senior homeowners that uses a home’s equity as collateral. The loan amount is a percentage of the home’s value determined by the age of the youngest homeowner. The loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not liable if the home sells for less than the balance of the reverse mortgage.
A jumbo mortgage is a home loan with an amount that exceeds conforming loan limits imposed by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. The limit is $417,000 in most parts of the United States, but is $625,500 in the highest-cost areas and in-between in others. The cost of a jumbo loan is higher than a standard loan, so expect a higher interest rate for a jumbo loan.