LOAN TYPES

Fixed-Rate Loans

Fixed-Rate loans are the most popular type of mortgage loan because the loan is based on an interest rate and monthly Principle / Interest payment that does not change over time. The property taxes and insurance costs may fluctuate, but many borrowers find fixed-rate home loans to be the best mortgage for their needs because they can create a budget and rely on a steady payment. Fixed-rate mortgages are offered on all Conventional, FHA, VA and Jumbo loan products

USDA-loans-California

Most company’s offer fixed-rate mortgages in terms of 15 or 30-years, however, you can ask for alternatives such as 10 or 20 year terms. The longer the term, the higher the interest rate will be. The longer term however, generally creates a lower payment because the payback is spread out over more years.

FHA

  • Minimum Down Payment: 3.50% which can come as a “gift” from approved sources

  • Up Front MI of: 1.75%, can be added to Loan

  • Monthly MI of: .85%

  • Maximum Loan Amount SFR: Loan amounts are set by counties. In many northern California counties, the limit is $474,950. Loan amounts above $417,000 have additional costs and or rate increases. In the San Francisco Bay Area, FHA loan limits are as high as $625,500.

  • Maximum Seller Concession: 6%

  • Minimum FHA FICO requirement without additional down payment requirements is 580…but most companies require at least 620.

  • Refinancing is allowed, at high loan to value ratios

  • Both Fixed-Rate and Adjustable-Rate loans permitted

  • Roof & Pest inspections not mandatory unless noted by appraiser or called for in contract

  • No Income Limits

  • Do not have to be a first-time buyer

  • Must be owner occupied

  • No requirement for reserves when purchasing a single family dwelling.

  • Non-Occupying co-borrowers allowed

  • Can utilize other state, county and city programs, and Energy Efficient Mortgage options

  • FHA requires 90 days from date of trustee sale before purchase contract can be written unless REO is a federally chartered bank

  • FHA Loans are Assumable

USDA Loans
  • A credit score of above 620 for most lenders
  • The property must be less than eight acres
  • The property can not have a pool
  • Must be located in a rural area or town, generally areas with less than 20,000 people
  • Applicants must have a household income of less than 115% of the median income in the United States (this is approximately $65,000 for a family of four.)
CalHFA

  • 30-Year Fixed-Rate Mortgage at below market rates (in most cases) for first-time buyers

  • Government Insured/Guaranteed Loans

  • 30-Year Fixed Government Insured/Guaranteed Mortgage. This program is for mortgage loans that are insured or guaranteed by FHA, VA or USDA and features a 30-year term with a low, fixed interest rate

  • Real Estate Owned (REO) Loan Programs

  • CalHFA Community Stabilization Home Loan Program. This program helps first-time home buyers purchase vacant home that are owned by participating financial institutions in certain area of California.

VA

There are some requirements applicable to VA loan funding. You will need to meet at least one of the following:

  • 90 days of service during wartime;
  • 181 continuous days of active service during peacetime;
  • 6 or more years of service in the National Guard or Reserves;
  • Being the un-remarried, surviving spouse of a service member who died in the line of duty or as a result of a service-related disability;
  • Must have DD214 with an honorable discharge

There is typically a requirement for borrowers to move into the property within 60 days after purchase and that it must be used as the primary residence. This means you cannot use a VA loan for renting out the property as an investment.

Reverse Mortgages

  • Must be 62 years of age, or older

  • Must be owner occupied

  • Must be able to demonstrate your ability to pay your property taxes and insurance

  • Available for most property types – Single Family, FHA approved condominiums, PUD’s and manufactured homes that meet FHA and lender guidelines

  • Can be used as a tool for guaranteed income, periodic payment of obligations, or in purchasing a home with no mortgage payment

Adjustable-Rate Loans

An adjustable rate mortgage differs from a fixed-rate mortgage in a lot of ways. Most importantly, with a fixed rate mortgage, the interest rate remains the same during the life of the loan. With an ARM, the rate changes periodically, usually in relation to a financial index, and the payments can go up or down depending on how the index performs.

All ARM’s have some common features. Basically, they are the adjustment period, the index, the margin, the note rate, initial rate, interest rate caps and payment caps (see the attached descriptions).

Payments are calculated by adding the margin set by the lender to the particular index. Some common indices utilized include:

  • Cost of Funds Index

  • Treasury Bills

  • LIBOR

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