Mortgage Types and Programs, a Bird’s-eye View
Understanding that each individual mortgage situation is unique, this information is intended to provide a general idea of the most common types of mortgage programs currently available. In order to find the most suitable path to home ownership for you, our Firefighter Mortgages® consultants are ready to assist.
When it comes to selecting the first responder home loan program that is going to help you best meet your mortgage objectives, the choices can seem overwhelming.
At FirefighterMortgages.com powered by Novus Home Mortgage, we understand that. We have dozens of program options available, including conventional, VA and FHA mortgages, to accommodate a variety of situations. We will gladly give you the information you need, empowering you to make an informed decision.
Here are a few of the basics:
Types:
Conforming:
Sometimes referred to as a “regular” mortgage, conforming loans adhere to the guidelines established by Fannie Mae and Freddie Mac.
The loan size is probably the most well-known guideline with a maximum amount of $417,000 in most continental US markets since 2013; other guidelines include the loan-to-value ratio (or percentage of the lesser of the sales price or appraised value borrowed), the debt-to-income ratio (percentage of monthly income earmarked for monthly debt obligations), credit score and history, documentation requirements, etc.
In general, a loan that does not meet these guidelines is considered a non-conforming loan.
A loan that does not meet the guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan or mortgage (see below).
Fixed Rate Mortgage:
Consider if you are looking for long-term consistency and predictability in your mortgage.
A fixed rate mortgage, as its name indicates, is a mortgage loan with a fixed rate that stays the same for the pre-determined term of the loan. With 30 and 15 years as the most popular terms, many loans are also available for fixed terms of 10, 20, and 25 years.
The principal and interest (P & I) payment portion of the loan remains the same throughout the life of the loan. Each month, as the mortgage matures, a lesser portion of the payment is applied toward interest and a greater portion is applied toward principal reduction so that the last scheduled payment satisfies the loan.
Although the P & I remain consistent, property taxes, hazard insurance and mortgage insurance may be subject to change during the life of the loan which could ultimately change the monthly payment.
Adjustable Rate Mortgage (ARM):
Consider if you plan on selling or refinancing the property within a given time period.
With an ARM, the rate is fixed for a pre-determined period of time- typically 1, 3, 5, 7, or 10 years. After that, the rate is subject to periodic adjustments (typically once a year) commensurate with market conditions.
ARMs are certainly not for every situation, but can prove to be an efficient, short-term tool for managing a mortgage payment.
Programs:
Conventional Mortgage:
A standard mortgage loan offered by a government sponsored entity (not FHA or VA) which can be originated through direct lenders like us. They usually carry a 30-year term with fixed rates and have more stringent credit and down payment requirements than an FHA or VA loan.
Jumbo:
Conventional mortgage loan over $417K (or whatever the local conforming limit is according to Fannie Mae and Freddie Mac guidelines).
Jumbo loans are generally seen in association with higher priced markets and properties. They usually involve more stringent underwriting guidelines than a standard conventional or government-backed mortgage.
Since Fannie Mae and Freddie Mac do not fund or purchase these loans directly, the lender sees them as a riskier proposition compared to a conforming loan and typically imposes a higher interest rate as compared to a conventional loan.
Portfolio:
These loans are geared toward any number of non-traditional lending situations.
Mortgage terms are specific to the lender because they are not required to comply with guidelines from outside agencies. As a result, interest rates may be higher than conventional and larger down payments are often required.
The lender that funds the loan typically also services it for the life of the loan.
FHA Mortgage: Government insured loan designed for first time home buyers.
This is one of our most popular programs and a great way to enter the world of home ownership. Here are some highlights:
- Insured by the Federal Housing Administration (FHA)
- Popular with first time home buyers and low-to-moderate-income borrowers
- Easier qualification
- Lower rate
- Low minimum down payment requirement (3.5%), all or part of which may be gifted
- Somewhat flexible with credit score compared to some other programs
USDA: Government insured loans with strict qualification guidelines geared towards developing rural areas.
- US Department of Agriculture, Rural Housing Loans
- Property (and borrower) must qualify
- Restrictive and explicit federal eligibility rules are just one reason why working with an experienced team, like our crew at FirefighterMortgages.com by Novus Home Mortgage, is so important!
- Low rates
- Zero-down-payment option for qualified borrowers
- 100% financing if property and borrower qualify
- Flexible with income (Income cap per household)
VA Mortgage: Government home loans guaranteed by the Department of Veterans Affairs (VA) for American Veterans.
If you are active-duty military or an honorably discharged veteran, we thank you for your service. We are proud to offer VA mortgage loans, an excellent way to purchase for eligible borrowers.
- Who is eligible?
- Active duty military Personnel
- American Veterans
- Surviving spouses of American Veterans
- Strict eligibility guidelines
- COE – certificate of eligibility
- DD214, unless you’re active.
- May exclude Private Mortgage Insurance (PMI) fees
- No down payment required
- 100% financing (borrower must qualify)
- Flexible with credit
- Flexible with income
- Lower rates
We’re happy to discuss the first responder home loan program or programs that are most suitable in helping you meet your personal mortgage goals. Please let us know what questions you have and how we can help you.