Types of Mortgages

9.25.2019

Purchasing a home is a fun and exciting time, but it can also leave you feeling overwhelmed. Understanding the mortgages available to you can help! We will provide some basic information about the types of mortgages available.

Conventional Loan
A conventional loan is not guaranteed or insured by the federal government.

  • Various fixed and variable terms available (e.g. rate & length in years).
  • Private Mortgage Insurance applies if you do not pay 20% down.
  • Credit Scores can be as low as 640.
  • Credit Scores of 720+ will receive the best rates.
  • As little as 3-5% down on this program.

Private Mortgage Insurance (PMI) is an insurance that protects the investor when you do not have 20% to pay down on your mortgage loan. This premium is added into your monthly mortgage payment along with your principal, interest, taxes, and insurance (PITI). This is not credit life insurance, which would pay off your mortgage in case of your death.

FHA Loans
The Federal Housing Administration (FHA) mortgage program is managed by the Department of Housing and Urban Development (HUD).

  • Various fixed and variable terms available (e.g. rate & length in years).
  • Down payment requirement is 3.5%.
  • The seller can pay up to 6% of closing & prepaid costs.
  • You have a HUD Mortgage Insurance Premium, but FHA allows you to finance that cost.
  • Credit Scores can be as low as 580 (depending on investor).
  • Requires a Mortgage Insurance Premium (MIP).
  • Requires an escrow account for taxes and insurance.

Mortgage Insurance Premium (MIP) for an FHA insured loan is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of the down payment.

VA Loans
The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families.

  • Various fixed and variable terms available (e.g. rate & length in years).
  • The borrower can receive 100% financing.
  • The seller can pay up to 6% of closing and prepaid costs.
  • Requires a Certificate of Eligibility.
  • Credit score can be as low as 620.
  • Requires an escrow account for taxes and insurance.

USDA / RD loans
The United States Department of Agriculture (USDA) offers a loan program that helps low- to moderate-income borrowers buy homes in rural areas.

  • This is an income based loan.
  • The borrow can receive 100% financing.
  • The seller can pay up to 6% of closing and prepaid costs.
  • Requires a Mortgage Insurance Premium (MIP).
  • Requires a Guarantee Fee of 1% which can be added to your loan.
  • Requires an escrow account for taxes and insurance.

On government loan programs such as FHA, VA, and USDA, the property being purchased should not be one that requires numerous repairs or is considered a "fixer upper."

**All loan applications are subject to credit underwriting approval.**

This is a brief overview of the different types of mortgage loans available. We encourage you to ask questions and research each option further. Our experienced mortgage specialists are here to guide and assist you in your Home purchase or refinance. For more information, please check out our Mortgage website at https://firstcnb.mymortgage-online.com/.

 

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