Choosing Your Mortgage
With the variety of choices in mortgage loan programs available, sometimes the selection process can be mind boggling. At iLoan we’re here to add our expertise to help you with that process but we are also here to equip you with enough tools and information to put you in the driver’s seat.
With the combination of our mortgage calculators, loan pricing engine, mortgage insurance calculators and this informational resource page regarding loan types and programs, we hope to be giving you the tools and knowledge you need to confidently make an informed decision.
Feel free to contact us at any time to request additional information and resources in this endeavor.
A conventional loan is a loan made against real estate as security that does not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgagee can be an institutional lender or a private party. Conventional loans include those loans insured by private mortgage insurance companies.
Fixed Rate Mortgages
The most popular of all mortgages are fixed rate mortgages. For years, iLoan has offered low fixed rate mortgages for Fannie Mae loans, Freddie Mac loans, FHA loans, VA loans, Jumbo Loans, Super Jumbo Loans, Non-Agency loans and Rural Development loans. While they’re not for everyone, most people prefer a mortgage in which the interest rate does not change during the entire term of the loan and the payments include both principal and interest.
Temporary Buydown Mortgages
They are types of mortgages with a series of initial, temporary interest rates that increase in a year- over- year fashion until a permanent interest rate is reached.
FHA Fixed Rate Loan
The Federal Housing Administration (FHA) provides mortgage insurance on loans offered by approved FHA lenders. It insures loans on single family and multi-family homes. As the largest insurer of mortgages in the world, it has become one of the most popular financing vehicles in recent years, offering many benefits to the borrower.
FHA Streamline Refinance
The “streamline” refers only to the amount of documentation and underwriting that needs to be performed. The basic requirements of a streamline refinance are:
● The mortgage to be refinanced must already be FHA insured.
● The mortgage to be refinanced should be current (not delinquent).
● The refinance is to result in a lowering of the borrower’s monthly principal and interest payments by at least 5% of the existing payment.
● No cash may be taken out
FHA 203K Loans
When a homebuyer wants to purchase or refinance a house in need of repair or modernization, the borrower usually has to obtain financing first to purchase the dwelling or financing to take out any existing liens should they already own it; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. This can be expensive and frustrating, but FHA’s 203K and 203K Streamlines do this all in one convenient loan.
VA Loans are insured by the Federal Government. While FHA is targeted towards first time home buyers or affordable home buyers, VA programs are limited to members of the military. VA loans are available to active, inactive, and retired members of the military and members of the military reserve. Surviving spouses have eligibility rights as well.
Jumbo Interest Only Loans
Interest-only mortgage loans are like regular home loans but instead of paying monthly principal and interest on the loan, only the interest is paid. This usually, but not always, continues through the period for which the loan is fixed. Just as interest only loans largely went away after the great depression, so too are they largely going away after this great recession. Nonetheless, they still exist in the jumbo and super jumbo markets.
Energy Efficient Mortgages
FHA’s Energy Efficient Mortgage program (EEM) helps home buyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.
Jumbo and Super Jumbo Loans
A jumbo mortgage is a loan that has a loan amount that exceeds the conforming loan amount that can be purchased by Fannie Mae or Freddie Mac. A Super Jumbo Mortgage is classified as a residential mortgage or other home-equity secured loan in an amount greater than $650,000, although lenders differ on just what constitutes a super jumbo mortgage subject to their own internal investment criteria. Jumbo loans are usually purchased by private investors or maintained by the lender itself.
VA IRRRL Streamline Refinance
If you are looking to lower your interest rate and your monthly mortgage payment on your VA mortgage, you may want to consider an IRRRL. IRRRL stands for Interest Rate Reduction Refinancing Loan. You may see it referred to as a “streamline” or a “VA to VA.” Completion of an IRRRL must result in a lower interest rate, except when refinancing an existing VA guaranteed adjustable rate mortgage (ARM) to a fixed rate mortgage. In this particular instance, the rate may increase.
Fannie Mae HomePath
Fannie Mae created special financing packages for purchasers of homes that they own and are selling. Few lenders are able to facilitate these programs. Proudly, iLoan offers both.
Rural Development Mortgages
The United States Department of Agriculture has two very distinct programs designed to promote home ownership for rural Americans. The Direct RD (rural development) loan is primarily used to help low income individuals purchase homes and is available only at your local USDA office. These loans provide housing at a subsidized interest rate and can have a “recapture” feature when the home is sold.
MN Housing Finance Agency Loans
Through the Minnesota Housing Finance Agency (MFHA), the State of Minnesota offers eligible homebuyers loans with subsidized interest rates and mortgage insurance for low-to-moderate income homebuyers, that is correct, it is not just for first time homebuyers anymore!
Fannie Mae MyCommunity
Fannie Mae My Community loans are different from other 95% financing mortgages in the regard that they have dramatically cheaper monthly mortgage insurance, are subject to income limitations and don’t require any of the borrower’s down payment to be from their own funds. Fannie Mae My Community loans also allow community seconds up to 105% of the purchase price or appraised value; whichever is less. (Community seconds are 2nd lien mortgages that may be funded by a municipality, state, county, state or local housing finance agency, nonprofit organization, or an employer. These loans can assist buyers with down payment and closing costs.) Lastly, this loan allows for extra flexibilities with options to serve teachers, police officers, firefighters, and health care workers, and people with disabilities or a family member with a disability.
A FHA HECM reverse mortgage loan is a very special type of loan that permits borrowers to convert some of the equity in their home to cash. Reverse mortgages can give senior homeowners the funds they need to lead a more secure and enjoyable retirement, repair their homes, or potentially pay for long-term care and other necessary expenses, while allowing them to continue to live in their own homes for as long as they want.
Home Affordable Refinance
Many homeowners pay their mortgage on time but are not able to refinance to take advantage of today’s lower mortgage rates. The White House spearheaded an initiative to allow HARP Mortgages consumers to get a Home Affordable Refinance through Fannie Mae or Freddie Mac. Their programs are called the DU Refi Plus and LP Open Access respectively. This is particularly useful to borrowers wishing to refinance if they have lost equity in their home as a consequence of the housing market downturn.
Fixed Period ARM’s
A fixed period adjustable rate mortgage is has a fixed rate for a certain amount of time followed by an adjustable period through the remaining term of the loan. The periods for which the loan is fixed are usually 1, 3, 5, 7 or 10 years. Once the loan becomes variable the interest rate is determined by adding the loan’s margin to the index that the loan is tied to. For instance, if the loan’s margin was 2.25% and the index value were 1.75% then the rate would be 4%.
Community Land Trust Mortgages
Community land trusts are created to preserve long-term affordable housing by purchasing homes in their communities, then leasing the land using a long-term ground lease to low-income and moderate-income families at affordable monthly ground rents. Community Land Trusts (CLT) have had a foothold in the Twin Cities for decades. More broadly, the leasehold form of home ownership is more common in Minnesota than many would think. It is a market that Realtors would do well to be skilled in. More especially, it is a market that is crying out for more readily available, quality financing through Fannie Mae. For the most part, loans for purchasers of Community Land Trust properties are done as portfolio loans at banks that typically come with higher rates and/or less advantageous terms. But better options exist.
New Construction Mortgages
There are several loan types that can be used for purchasing and/or building newly constructed homes. Each has their own distinct advantages and disadvantages. When buying or building new construction homes, it’s important to weigh each of the pros and cons to each type of financing.
Lease with Option to Purchase
Since the housing crash and great recession, there have been swelling ranks of people that have had credit damaged but have increased their savings and reduced their consumer debt. Many of these people, in a reasonable timeframe will qualify for conventional, VA, FHA, or Rural Development loans but at this time, do not. For those who have their finances situated, saved money and increased their capacity to cover their housing payments, a Lease with Option to Purchase is a great choice.