Conventional vs. Unconventional MortgagesEssentially, a conventional loan is a deal between you and your lender that will meet Fannie Mae’s underwriting guidelines. An unconventional loan breaks those guidelines and can include government-insured programs like FHA, VA, or USDA.
Conventional LoansPros can show up when you calculate interest rates and fees, your total cost is lower than an unconventional loan. Cons could be that the unconventional loans are backed by the government, so lenders may require a higher down payment on conventional loans. You will also have to pay private mortgage insurance (PMI) if your down payment is less than 20%.
FHA LoansPros can include that you can get a mortgage with as little as a 3.5% down payment. However, cons can mean that you are required to pay a mortgage insurance premium (MIP), which is similar to a PMI - except that it must be paid for the life of the loan.
VA LoansWith the Department of Veterans Affairs (VA) loans, it allows military veterans to buy a home with virtually no down payment or mortgage insurance. However, when you purchase a home with zero money down, and things change in the housing market, you may end up owing more than the market value of your home. VA loans also come with a funding fee, which can range anywhere from 00% to 3.3%. This will depend on your military status, down payment amount, and even whether it’s your first time financing a home.
USDAThe pros for a United States Department of Agriculture (USDA) loan program are that it’s managed by the Rural Housing Service (RHS), and is great for people living in rural areas who also show a financial need. This loan can allow many to buy a home with no down payment. Cons include that there are additional fees associated with this loan program and some stricter inspection requirements.
Conforming vs. Non-Conforming MortgagesYour mortgage will be either a conforming or non-conforming, based on how much money a lender will give you. A conforming loan will meet the standard underwriting guidelines for a specific mortgage program, while a non-conforming loan would exceed the size limits established by lender guidelines.
Conforming LoansPros would be that you’ll pay a lower interest rate compared to non-conforming loans. However, the cons can include buying a lower priced home to stay in the conforming loan amount range.
Jumbo Loans (Non-Conforming)The pros of this type of loan are that they exceed the loan amount limits set by Fannie Mae and Freddie Mac, which means you can get a higher-priced home. However, the cons are that they require excellent credit and larger down payments, and they have higher interest rates than conforming loans.
Reverse MortgagesWith most mortgages, the longer you own your home, the more of your home you own. There is a different mortgage, and that’s a reverse mortgage.
Pros of this type of mortgage are that senior homeowners can supplement their limited income by borrowing against their home equity. They can then receive tax-free, monthly payments or a lump sum from the lender.
Cons for this type of mortgage are that you sell off your equity for cash. With a traditional mortgage, the amount you borrow and have to repay goes down over the life of the loan, but with a reverse mortgage, the amount you actually own goes down as your interest accumulates.
Lake of the Ozarks Home LoanTeam Lasson looks forward to helping you buy the home of your dreams at the Lake. From a primary residence to a vacation home at the Lake of the Ozarks, we have done it all. Now is proving to be an AMAZING time to lock in your interest rate and get your mortgage or refinance finished up. If you have questions about this, we would love to chat with you! Start by visiting our website (www.YourLakeLoan.com) and filling out the application - we look forward to helping you buy the home of your dreams!
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Senior Loan Officer
NMLS #: 493712
4655 B Osage Beach Parkway
Osage Beach, MO 65065
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.