Which Mortgage Loan
is Right for You?

A Conventional loan is a mortgage that is not backed by a government agency. Conforming conventional loans follow the lending guidelines set by the Federal National Mortgage Association (FNMA or FannieMae) and the Federal Home Loan Mortgage Corporation (FHLMC orFreddie Mac).

You can get a conventional loan with as little as 3% – 5% down,however, if you don’t put at least 20% down, you will be required topay private mortgage insurance which insures the lender for theequivalent of a 20% down payment in case of default.

It’s possible to get approved for a conventional loan with a credit score as low as 620 but many lenders require a credit score of 660-680 or higher.

The interest rate and private mortgage insurance varies based on your credit score. The higher your credit score, the better your interest rateand private mortgage insurance rate.

Conventional loan limits vary by the county in which the property is located. In California, the maximum conventional loan limits rangef rom $647,200 up to $970,300 in the “high cost” counties which include Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, SanFrancisco, Santa Clara and Santa Cruz. The conventional loan limits for every county in the U.S. can be found using this link.

An FHA loan is issued by an FHA-approved lender and insured by theFederal Housing Administration (FHA). It was designed toaccommodate buyers/borrowers with lower minimum down paymentsand credit scores than required on many conventional loans. 

A FHA loan has two levels of mortgage insurance:

Upfront mortgage insurance premium (UFMIP) is 1.75% of the loan amount. This can be financed into the loan amount or paid in cash at closing.

Monthly mortgage insurance varies from .15% of the loan amount(annual cost) to .75% of the loan amount (annual cost) depending on the down payment and loan amount 

Consider this loan if:

– You are purchasing a primary residence.

– You don’t have a long history of established credit or little established credit which often means a lower credit score.

A jumbo loan is typically a mortgage that exceeds the countyconventional loan limits.

Jumbo loans are generally offered by large banks and financialinstitutions and are kept in their loan portfolio. Each individual bankand financial institution can set their own set of approval guidelinesaccording to their investment goals for their portfolio. For this reason,it can be complicated for a buyer/borrower to know which lender islikely to offer the best approval guidelines for their individual situation.

Jumbo loans are generally more conservative as far as minimum creditscores, down payment, debt-to-income and funds in the bank afterclosing.

Many Jumbo lenders allow 3 rdparty lenders such as mortgage banksand mortgage brokers to originate loans on their behalf as long as theirapproval guidelines are met in their entirety. This can be very helpfulto a buyer/borrower as a one-stop entity to compare approvalguidelines between various lenders and find the right fit.

A VA home loan is specifically for Servicemembers, Veterans and eligible surviving spouses to purchase or refinance a primary home. VA loans are provided by private lenders such as banks and mortgage companies with a portion guaranteed by the Veteran’s Administration (VA).

VA loans generally require $0 down payment.

VA Funding Fee: The Funding Fee varies whether you are using a VA loan as a first-time buyer or subsequent use and down payment. The VA Funding Fee may be paid in cash or financed into the loan amount

A VA loan requires a Certificate of Eligibility issued by the Veteran’s Administration.

There is no shortage of highly qualified buyers/borrowers who don’t fit

“inside the box” of standard approval guidelines. As a result, there is a

subset of lending that is dedicated to this niche. Some options include:

  • Bank statement program for self-employed
  • Asset Depletion (using assets as income, normally post-retirement but not always!
  • Real Estate Investor – qualify on cash-flow
  • Cross-collateralized financing on multiple properties
  • More!

Uncertain which is the best mortgage option is best for your personal situation?

We’re here to help!