"Mortgage Capital and Investment LLC has handled our loans for the past three years with approximately 30 loans per year. We have been very pleased with the service and knowledge of the industry and would highly recommend them and will continue to send our clients to them as well."
Invest-N-Homes.com, J. Worden
Invest-N-Homes.com, J. Worden
Residential Loans Types
Conventional/Conforming Loans
Conventional loans or conforming loans are secured by government sponsored entities or GSEs such as Fannie Mae and Freddie Mac. Conventional 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 $417,000 in 2006. 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, 2006.
2006 Conventional Loan Limits
- One-family loans: $417,000
- Two-family loans: $533,850
- Three-family loans: $645,300
- Four-family loans: $801,950
- Note: Maximum original loan amounts are 50 percent higher for first mortgages on properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
Nonconforming Loans
Home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Nonconforming loans usually incur a rate and origination fee premium. With the emergence of new lenders and programs to the mortgage market on a weekly basis there is a loan program for just about anyone.
Jumbo Loans
Loans which are larger than the limits set by Fannie Mae and Freddie Mac are called jumbo loans. Because jumbo loans are not funded by these government sponsored entities, they usually carry a higher interest rate and some additional underwriting requirements. A strategy to lower your overall interest payments if your purchase or refinance balance is above $417,000 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.
Super Jumbo Loans
Jumbo loans refer to loan amounts from $417,000 to $650,000. Loan amounts higher than $650,000 are usually referred to as Super Jumbo Loans. Many lenders employ different criteria and pricing to loans greater than $650,000 and thus label them differently.
FHA/VA Government Loans
FHA mortgage programs are available to all buyers. These programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans. FHA loan programs are particularly beneficial to those buyers with less available cash.
FHA loan benefits:
- *Only requires a 3% down payment
- *Ability to finance closing costs
- *FHA has set limits on the amount lenders can charge for some closing cost fees (e.g. origination no more than 1% of mortgage).
- *Maximum mortgage amount can vary significantly by area. FHA adjusts this amount periodically based on certain economic variables. You should check with your local FHA office or approved lender to determine your maximum mortgage amount.
- *Under certain conditions, automatic cancellation of the FHA mortgage insurance premium
VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms up to 100%.
Subprime loans
Subprime loans are for persons with blemished or limited credit histories. The loans carry a higher rate of interest than prime loans to compensate for increased credit risk. If you have bad credit, you may not qualify for a conventional loan or a low down payment loan offered by FHA and VA. In this case, you may consider a subprime mortgage. Because of the higher risk associated with lending to borrowers that have a poor credit history, subprime loans typically require a larger down payment and a higher interest rate.
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