Financing Options At 1st Colorado Mortgage Solutions, our experienced team is well versed in numerous types of mortgage loans. To give you more insight in to various mortgage options, we have compiled some of our most frequent loans below. Conventional Loans Conventional loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, then package the mortgages into securities, and sell the securities to investors. By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing, resulting in the availability of mortgage credit for Americans. Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announce new loan limits every year. Jumbo Loans Jumbo loans are mortgages for amounts above the federally-mandated conventional loan limit. Currently, the jumbo loan limit is $417,000. The structure of a jumbo loan is similar to other conventional mortgage loans, the primary differences being the slightly higher interest rate and the increased down payment. Typically, rates for a jumbo loan can be ½ to 1% higher than rates for standard conventional loans. Jumbo loans were designed to help high-income individuals afford luxury homes or smaller homes in highly desirable areas. However, thanks to a major inflation in the housing market over the past few years, more and more middle-income Americans have had to turn to jumbo loan financing to get into their dream homes. Jumbo loans are available as fixed-rate, or as a mortgage that adjusts after a fixed period. An adjustable-rate mortgage can yield a smaller monthly payment, while fixed rates can give you secure, fixed payments, year after year. The loan duration can vary from ten to thirty years. Jumbo loans are much more flexible than most people think. Applying for a jumbo loan doesn't take months of processing. We make it easy for you to afford the dream home you want or to refinance to a lower rate. FHA An FHA mortgage can be an attractive option for many first-time homebuyers, as down-payment requirements for a FHA mortgage can be as low as 3 percent, which can be a gift from a family member. However, you don’t need to be a first-time buyer to take out an FHA mortgage; the only stipulation is that a purchaser may only have one FHA mortgage at a time. The FHA, or the Federal Housing Administration, was established by the government to improve housing conditions for Americans. The government established the FHA mortgage program in 1934 to improve existing housing standards and conditions. Prior to 1934, a down payment was typically 50 percent of the home’s price and payments were stretched out between only 1-5 years. The FHA does not actually lend the money; it simply ensures that the total mortgage will be paid to the lender if the buyer defaults. The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program. VA Loans VA loans are made by a lender, such as a mortgage company, savings and loan or bank. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $203,000 depending on the borrower's income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts. The only additional documentation necessary is a veteran's certificate of eligibility and the VA-assigned appraisal. At 1st Colorado Mortgage Solutions, our lenders are approved for automatic processing of VA loans, which means that the buyer's loan can be processed and closed by the lender without waiting for VA's approval of the credit application. Additionally, our lenders, approved under VA's Lender Appraisal Processing Program (LAPP), may review the appraisal completed by a VA-assigned appraiser and close the loan on the basis of that review. The LAPP process can further speed the time to loan closing. Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans Most important consideration: no down payment is required, in most cases. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $203,000. Flexibility of negotiating interest rates with your lender. No monthly mortgage insurance premium to pay. Limitation on buyer's closing costs. An appraisal which informs the buyer of property value. Thirty year loans with a choice of repayment plans: Traditional fixed payment (constant principal and interest; increases or decreases may be expected in property taxes and homeowner's insurance coverage) Graduated Payment Mortgage--GPM (low initial payments which gradually rise to a level payment starting in the sixth year) In some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan) For most loans for new houses, construction is inspected at appropriate stages to ensure compliance with the approved plans, and a 1-year warranty is required from the builder that the house is built in conformity with the approved plans and specifications. In those cases where the builder provides an acceptable 10-year warranty plan, only a final inspection may be required. An assumable mortgage, subject to VA approval of the assumer's credit. Right to prepay loan without penalty. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. FHA $100 Down HUD (the US Department of Housing and Urban Development) has announced a limited-time sales incentive program which allows qualified buyers to buy HUD homes with a down payment of only $100, as long as: The buyer will live in the property for at least one year (investors do not qualify for this incentive) The buyer offers the full asking price for the home, and The buyer uses an FHA loan for the purchase. Not all foreclosure properties are owned by HUD. The determining factor is whether or not the homeowners had an FHA loan before they lost their house -- if they did, the home goes back to HUD for re-sale; if not, the bank which owned the foreclosed mortgage owns the home and tries to re-sell it. The homes owned by banks, because the borrowers did not have an FHA loan, do not qualify for this program. Not all buyers qualify for the program either; you have to meet the qualifications indicated below for an FHA-insured loan: Home must be owner occupied for at least one full year Buyer must make full price offer to HUD Must have debt to income ratio of 31% to 47% Minimum credit score of 580 Have a valid social security number. Demonstrate 2 years of employment history. Permanent Resident Alien FHA mortgage insurance required Other facts about $100 down FHA loans: Various loan types available -FHA Fixed Rate 30 year, FHA Fixed Rate 15 year, FHA Secure 30 or 15 year, FHA Stimulus 5/1 ARM (Adjustable Rate Mortgage) Maximum loan amount: $362,790 Applies to single family residences, townhomes, Planned Unit Development homes, condos Section 502 Rural Housing Guaranteed Loan Program Under the Guaranteed Loan program, the Rural Housing Service guarantees loans made by private sector lenders. A loan guarantee through RHS means that, should the individual borrower default on the loan, RHS will pay the private financier for the loan. There is no required down payment, but families must be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must be without adequate housing and be unable to obtain credit elsewhere, yet have acceptable credit histories. Section 502 Single Family Housing Direct Loan Program Under the Direct Loan program, individuals or families receive direct financial assistance directly from the Rural Housing Service in the form of a home loan at an affordable interest rate. These loans may be made to eligible applicants to buy, build, repair, renovate, or relocate homes, to provide related facilities, or to refinance home debts under certain conditions. Applicants for direct loans from RHS must have very low or low incomes. Very low income is defined as below 50 percent of the Area Median Income (AMI); low income is between 50 and 80 percent of AMI. There is no required down payment, but families must be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must be without adequate housing and be unable to obtain credit elsewhere, yet have reasonable credit histories. Loans are made for up to thirty years. Construction Loans Our one time close new home construction loan program allows you to qualify for the loan once, lock in the permanent rate, sign one set of loan documents and have up to 12 months to complete your residential construction project. You can lock the permanent rate at loan closing and during the construction period, interest is charged only on the funds that have been disbursed. When the project is complete, the permanent loan period begins. Depending on whether you can fully document your income or not, you can finance up to $3,000,000 and up to 90% of the future value.Unlike a purchase transaction of an existing home, new home construction loans involves determining the value of something that is not yet constructed, the as-built value. After you have made your choice of general contractor, we will need a resume and a builder's application to be completed along with a credit check. This is for your protection as well as a lenders requirement, which ensures that he/she is experienced, has a proven track record, and will be able to perform under the terms of the contract. Each general contractor approval is good for six months. The fact that we approve a general contractor does not imply that we guarantee his/her work and/or performance. Remodel Construction Loans When purchasing an existing home with the intention of performing a major remodel on the home, a construction loan is the most effective way to go. This type of loan will give you enough money to purchase the home, and conduct the remodel, basing the loan amount on the future value of the home rather than the purchase price. Loan to cost ratios can be as high as 95% where the "cost" is defined as all the costs associated with: Lot/existing property purchase Soft cost of construction, such as architectural plans, permits, fees etc. Hard costs of construction which are all the actual costs associated with the physical work and labor. Closing costs, such as loan fees, title fees, real estate taxes, per diem interest, and closing agent fees. Interest reserve, the reserve account that will make the payments on the construction loan during construction. Contingency reserve, the reserve account that will pay of the unexpected cost overruns. The same loan can be used to completely remodel and/or add on to an existing home, when the present equity is not enough to complete the project using a home equity line of credit. The loan to value will be based on the future value of the property except if you have owned the property for over a year, then the loan to cost can be as high as 100%. All repair, renovation, rehabilitation and expansion expenses, including luxury items such as pool, spa, or tennis courts are allowed. Recasting features Recasting is known as an adjustment to the current mortgage - a loan modification - that does not involve the issuance of a new mortgage guaranty insurance certificate. With a recasted loan, a modification may be made to the type of instrument involved. In whatever form a recast loan takes, the major benefit to the borrower is the potential for substantially reduced mortgage payments. For example, suppose you are relocated and buy a new home before your old home sells. Due to a limited amount of funds, you have only 10% to put down, resulting in PMI (private mortgage insurance), and a higher payment. However, once the old home sells, you will have additional funds to use to pay into the new loan as extra principle. The lender "recasts" the loan by re-amortizing the remaining balance over the remaining term. This lowers your monthly P&I (principal and interest) payment, as well as perhaps dropping PMI. A numbers example: You put 10% down on a $300,000 home. The $270,000 is financed at 7% over 30 years, with a payment of $1,796. You then pay an additional $50,000 to the lender 1 year down the road. And by paying a re-casting fee (usually $150 - $250), the new loan balance of (approximately) $220,000 is amortized over 29 years, providing a new payment of $1,479. VA Streamline Refinance Going by the official name IRRRL, or Interest Rate Reduction Refinancing Loan, this incredible new loan refinance program was recently introduced by the VA as a way to keep veterans in better mortgages. It is available to anyone with a current VA mortgage Loan. What makes this VA loan so amazing is that as long as you have kept on top of your monthly home mortgage payments and have not had any more than 2 reported 30-day lates on your VA loan in the last 12 months, then you are most likely eligible to LOWER YOUR INTEREST RATE without having to re-qualify! VA Streamline Refinance Mortgages are used primarily by veteran homeowners that want to get out of their current Adjustable Rate Mortgage or Variable Mortgage that will be adjusting to a higher rate soon, or by a veteran homeowner that sees an opportunity to lower their current fixed rate mortgage to a new rate and thus lower his or her monthly mortgage payments. A few of the amazing and exciting benefits of the VA Streamline Refinance Program are: No appraisal needed No income or employment verification No asset verification Credit score doesn’t apply You could possibly skip 2 mortgage payments Get cash refund of any escrow balance with your current lender Get up to $500 cash at closing No out of pocket costs FHA 203K Remodeling Loan In the current market, many foreclosed homes are in disrepair due to vandals, theft, and neglect. In the case of an FHA 203K loan, the loan value is based upon the after repair value and includes an escrow account to complete the repairs needed to bring the house to a condition the lender prefers. The current condition of the property is not as important as the renovated condition. This provides an outlet to purchase dilapidated properties, many of which have spent extended periods on the market due to the lack of availability to traditional financing. . What this means to the home buyer is generally a significant discount to "as-is" value and, quite often, a fantastic deal on a house. These loans are used in a few different ways: To purchase an existing home (and the land attached to that home) to renovate it. To pay off existing debt on a current residence and renovate it. To purchase an existing home with the intent to move it to a new piece of land in a more preferred location. The eligible improvements allowed on FHA 203K loans are numerous and extensive. About the only thing HUD frowns on are luxury improvements that are not going to be a permanent piece of the property. The easiest and quickest version is the FHA 203K Streamline. This loan is for repairs under $35,000 that do not involve any kind of structural renovations. For Streamline FHA 203K's you will have two draws. Generally, the lender will release 50% upfront and 50% when the work is completed. On the full FHA 203K, loans exceeding $35,000 or involving structural repairs, the process becomes slightly more complicated. Many times on these when you are doing more extensive repair you will need to involve an architect and get architectural drawings so the contractor bids and appraisal are accurate. You will also be required to have a HUD approved 203K consultant that will help determine repairs and administer draws. DISCLAIMER: All loans are subject to individual approval and qualifications. Please contact First Colorado Mortgage Solutions for a free consultation.