Types of Mortgages FAQ

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Can I get a conventional mortgage loan after bankruptcy?

If you have been discharged from a Chapter 7 bankruptcy for four years or more, you are eligible to apply for a conventional mortgage loan. If you have had a Chapter 13 bankruptcy, you must have documentation that your credit reputation has been re-established for at least two years.

When are adjustable rate mortgages (ARMS) the best option?

An adjustable rate mortgage ARM may be the right choice if you are confident that your income will increase steadily over the years or if you anticipate a move in the near future, and aren't concerned about possible interest rate increases.

Is it possible to pay off my loan ahead of schedule?

You can accelerate the process of paying off your loan by paying extra money each month or making an extra payment at the end of the year. When you send extra money, be sure to specify that the extra payment is to be applied to the principal. Lenders usually allow loan pre-payment, though you may have to pay a penalty to do so.

How large of a down payment is required with an FHA loan?

For FHA loan you will need at least 3.5 percent for your down payment. Note that the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment typically require a mortgage insurance policy to secure the loan. When determining the amount of your down payment, keep in mind that you'll also need money for closing costs, moving expenses, and possible improvements and repairs.

What happens if interest rates decrease and I have a fixed rate loan?

If interest rates drop substantially, you may need to look into refinancing. If you plan to be in your house for at least 18 months and you can get a rate 2% less than your current rate, refinancing is smart choice. Keep in mind that refinancing may involve paying many of the same fees paid at the original closing, plus origination and application fees.

Does a VA loan offer advantages that conventional loans do not?

There are many benefits available with VA loans that are not offered by conventional loans. This is especially true for first-time home buyers with little or no funds for a down payment. VA Home Loans do not have the private mortgage insurance requirements that conventional loans do, and VA Loans usually have more competitive rates. Another advantage VA loans offer is that VA loans are not subject to the higher closing costs associated with conventional loans, and there are certain fees that VA mortgage borrowers cannot be charged.

What is meant by a VA Loan is guarantee?

The Veteran’s Administration guarantees the loan to the lender in the event of default. It does not mean that you are guaranteed a loan, because the lender is the one who actually loans the money. You still must qualify for the loan based on credit and income standards set by both the VA and the lender.

Does the VA offer interest only loans?

Currently the VA does not offer any interest only programs. The borrower pays back to the principal of the loan and gains equity with every payment.

Is it possible to use a VA Loan for a farm or business?

The VA does not offer farm loans or business loans at this time; however, you can buy a home with some acreage as long as it’s not considered an income producing property. There also must be other comparable properties that have recently been sold in the area.

Is a VA Loan through the government, a private lender or both?

Your VA mortgage will be arranged with a private lender. The VA does not provide the loan itself. However, it does guarantee the loans that lenders issue. VA loan lenders have to follow the same guidelines of approvals in order to get the loan guaranteed by the VA. Lenders may have additional guidelines on top of those established by the VA in order to approve your loan.

Do I need to be a first-time home buyer to apply for a USDA home loan?

There are no restrictions regarding previous home ownership.

Are USDA loans only for low-income borrowers?

USDA Guaranteed loans are available to borrowers with moderate to low incomes. Income eligibility levels vary according to geographical location and household size.

What is the difference between a USDA loan and a rural development loan?

USDA loans are the same as and often referred to as, rural development loans. These are loans that are offered by the U.S. Department of Agriculture for helping improve the economy and quality of life in rural America.

What are the restrictions on where I can purchase a home using a USDA loan?

The USDA requires the property to be located in a rural area - details for your particular area may be obtained through the USDA. Towns with a population of 20,000 or less are typically considered eligible for a USDA home loan.

Is the USDA home loan process similar to other types of home loans?

As far as the borrower is concerned, a USDA home loan works just like any other kind of home loan. The loan process usually takes between 15 to 30 days, depending on how fast the appraisal is obtained and how long it takes the USDA regional office to approve the loan.