Home Loans

Loan programs come in many forms and from many sources. The factors in determining interest rate, monthly payments, down payments and closing costs is dependant on the loan structure and the source of funding. The term of the loan greatly affects monthly payments and total interest paid.

If you are able to use at least 3% of the loan amount as a down payment, a conventional loan may be right for you. A conventional loan is the most common type of loans and are secured by government sponsored entities such as Fannie Mae and Freddie Mac. Jumbo loans are funded by private investors for loan amounts higher than the limits of government sponsored entities.

Conforming loans are funded by the Fannie Mae and Freddie Mac programs. The companies do not lend the money but work with lenders across the country to find the mortgage loans that will properly meet your needs. As a secondary market for mortgage loans, they often purchase mortgages from lenders and package them into securities. These are later sold to investors.

There are limitations to the amount that a government sponsored entity is able to secure. A large loan to purchase or refinance a home is considered a jumbo loan. These loans have a higher loan amount limit than the government sponsored entities. As they are unable to be funded by two agencies, jumbo loans usually carry a higher interest rate.

The federal government and other state and private entities have produced programs to provide first time buyers and low to moderate incomes with a low down payment. These mortgages are insured by the Department of Housing and Urban Development through the Federal Housing Administration (FHA). While the FHA does not provide loans, they insure FHA loans. If you default on the loan, the lender will still received the funds. While there are size limitations, FHA loans are generous enough to handle most moderately priced homes across the country.

Veterans and others that qualify by military service may be eligible for a VA Certificate. These can be combined with a FHA loan. Originally, VA loans were created to help veterans with their future livelihood. VA loans offer low to no down payments and offer many of the same benefits as an FHA loan.

Bad credit may hamper the options for a conventional loan. If so, there are options with a subprime loan. Like other loans, these come in many forms based on the terms and loan amount. In addition, companies will evaluate your credit and help determine the best loan for your situation. Bad credit will generally cause higher interest rates because of the risk to the creditors on giving a loan.