Home Loans FAQ
Content about home loans FAQ
What is a conventional fixed-rate mortgage?
A “fixed-rate” mortgage is a loan that locks the interest rate for the life of the loan.
Your principal and interest payment stays the same for as long as you have your loan. A conventional (conforming) loan is a loan that conforms to established guidelines established by Fannie Mae or Freddie Mac. They usually require a minimum down payment of at least 5%.
What is an adjustable-rate mortgage?
An adjustable-rate mortgage (ARM) is a 30 year loan with an initial fixed-rate period, typically 3 to 10 years.
The interest rate may change, up or down, on an annual basis once the initial fixed rate period of the loan expires. This type of loan has limits (or Caps) that control the amount the interest rate can adjust up or down. This type of loan starts out with a lower rate/payment, but can increase quickly after the initial period ends. Your payment could increase a lot, often by hundreds of dollars a month. Make sure you know what your maximum payment could be and that you can afford it.
What is a JUMBO mortgage loan?
A JUMBO (Non-Conforming) 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.
What is Private Mortgage Insurance?
Private Mortgage Insurance, or better known as PMI, is an insurance premium that is paid either monthly or one time up-front to offset not having the typical down payment requirement of 20%.
PMI is normally required on any loan that does not have at least a 20% down payment. PMI is an insurance policy that lets you make a lower down payment by insuring the lender against loss if you fail to pay your mortgage.
What is an FHA mortgage loan?
An FHA mortgage loan is a loan offered by the government and HUD (the Dept. of Housing and Urban Development).
It is a program originally designed to assist first time home buyers in that it offers a lower down payment (3.5% vs. 5%) than conventional mortgages. An FHA mortgage can be obtained by anybody that qualifies for the program. You don’t have to be a first time homebuyer to obtain a FHA mortgage loan.
What is a VA mortgage loan?
VA loans are government home mortgages offered through the Department of Veterans Affairs (VA).
With a VA loan, eligible service members and veterans can buy a home with little or no down payment. They also can refinance their existing non-VA loan into a new VA loan or refinance their existing VA loan into another VA loan as long as they have the eligibility.