If you’re an individual looking to purchase or refinance a home, or if you’re a business owner looking to purchase property for your business, chances are one of Stonecrest Financial’s conventional loans will be the best fit for you. Most conventional loans are made through major banks, insurance companies or banking institutions.
There are two types:
This is a loan that fits (or conforms) into the specific loan limits set by the Federal National Mortgage Association (more commonly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac). Both are public government-sponsored enterprises (although Fannie Mae is a publicly traded company) and they exist to help borrowers keep housing costs low.
As for conforming loan guidelines, in general they are:
- A loan limit of $417,000.
- Income documentation and asset verification required.
- Minimum down payment of 5 percent is required.
- If LTV exceeds 80 percent, mortgage insurance will be required
- These loans usually – although not always – have better pricing than do Jumbo Loans.
The second type of residential loan is what is known as a Jumbo Loan (also called a non-conforming loan). This type of loan is one that can exceed a conforming loan’s limits and/or one that uses different guidelines.
A Jumbo Loan typically is priced higher than a conforming loan, but it offers borrowers the ability to borrow higher amounts (as much as $2 million), depending on the size of the property you’re considering.
A Jumbo Loan also may offer more flexible guidelines.
Government Loans: FHA Mortgages
The Federal Housing Administration was created in 1934 as an effort to bolster home sales during the Depression. By financially guaranteeing loans, the FHA lifts much of the risk of non-payment and foreclosure from private lenders. It is important to remember that the FHA is not a lender – it just guarantees your loan.
- Bankruptcy does not mean automatic disqualification. In an effort to allow more people to use FHA loans, bankruptcies that are two or more years old and are followed by good credit history do not prevent you from obtaining FHA loans.
- Less stringent credit requirements. Instead of looking solely at your credit report, the Federal Housing Administration looks at what it calls the “total scorecard.” This means that even if your credit score is low, the FHA will look at your record item-by-item and consider specific situations underlying poor scores, such as extenuating circumstances associated with a medical emergency. This allows the FHA to be more lenient. By relying on the total scorecard, the FHA is in a better position to assess and manage the risk of a given loan.
- Lower interest rates. Traditionally, subprime lenders require much higher interest rates in order to compensate for the increased risk of the loan. But, because FHA loans are guaranteed, there is substantially less risk for the lender and therefore interest rates are lower.
- 97 percent financing is available, so a lower down payment is permitted.
- Non-occupant co-borrowers can help you qualify for the loan. For example, parents can help their children qualify for FHA loans.
Note: FHA loans were originally created to help first-time buyers. However, people who are not first-time buyers may still qualify. But the FHA does not allow anyone to have more than one FHA-insured loan at a time.
Adjustable Rate Mortgages
An ARM is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
The most important basic features of ARMs are:
- Initial interest rate. This is the beginning interest rate on an ARM.
- The adjustment period. This is the length of time that the interest rate or loan period on an ARM is scheduled to remain unchanged. The rate is reset at the end of this period, and the monthly loan payment is recalculated.
- The index rate. Most lenders tie ARM interest rate changes to changes in an index rate. Lenders base ARM rates on a variety of indices, the most common being rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations.
- The margin. This is the percentage points that lenders add to the index rate to determine the ARM’s interest rate.
- Interest rate caps. These are the limits on how much the interest rate or the monthly payment can be changed at the end of each adjustment period or over the life of the loan.
- Initial discounts. These are interest rate concessions, often used as promotional aids, offered the first year or more of a loan. They reduce the interest rate below the prevailing rate (the index plus the margin).
- Negative amortization. This means the mortgage balance is increasing. This occurs whenever the monthly mortgage payments are not large enough to pay all the interest due on the mortgage. This may be caused when the payment cap contained in the ARM is low enough such that the principal plus interest payment is greater than the payment cap.
- Conversion. The agreement with the lender may have a clause that allows the buyer to convert the ARM to a fixed-rate mortgage at designated times.
- Prepayment. Some agreements may require the buyer to pay special fees or penalties if the ARM is paid off early. Prepayment terms are sometimes negotiable.
Our Reverse Mortgage Program allows you to turn a part of your home’s equity into tax-free cash that you can use for any purpose and with no repayment for as long as you live in your home. You can use your reverse mortgage funds to pay off debts and eliminate monthly mortgage payments.
To qualify, you must be older than 60 years of age and own your home outright, or have a small remaining mortgage balance. Our government-insured reverse mortgage can offer you many benefits:
- Your age qualifies you, not your credit or income.
- There are no monthly payments with a reverse mortgage.
- You continue to live in and own your home.
- Reverse mortgages do not affect Social Security, pension, or Medicare benefits.
- Get financial relief and start enjoying a more comfortable retirement.
If you’re looking to purchase a home or commercial property, contact a representative of Stonecrest Financial. We’ll discuss your needs and goals and walk you through the loan processing steps.
Call us at 800-557-7720 or contact us to send us a message.