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The First-Time Buyers Guide To Understanding What Program Is Right For You

Types of Loan Programs that Rock Mortgage has to Offer

With all of the loan choices out there it can be very confusing and intimidating for the average consumer to pick a loan that best fits their needs. Below you will find a list of the most common loans that we, at Rock Mortgage, make in Texas: (All of these programs are available for first time buyers with the exception of certain Jumbo products)

Conventional Loans

Loan approved form

(Fannie Mae/Freddie Mac) – this is the most common loan in the U.S., the most common term is 30 years, but 20- & 15-year options are available. A common misconception is that conventional loans require 20% down, that hasn’t been the case for over 30 years. If you aren’t putting 20% down, you’ll be required to carry P.M.I (Private Mortgage Insurance), normally that premium is added to your monthly payment and you’ll pay it monthly until you reach 20% equity or when your loan balance reaches 78% of the original sales price. We do have options that will allow you to pay the entire policy in advance or we can buy it out by increasing your interest rate. If you are a first-time home buyer you may qualify our Home Ready or Home Possible (3% down, discount rates and P.M.I) programs (see the link to both programs near the bottom of the blog)

A – Credit Score requirement 640+

B – Down payment requirement 3% – 20% (3% is reserved for first time buyers only)

C – Max loan amount for this region is $548,000 (as of 01/01/2021)

 

FHA Loans

(Government Loan), this is a loan that is guaranteed by the Federal Housing Administration, and it’s a great choice for first time home buyer with lower credit scores or consumers with a higher debt to income ratio. FHA is also more forgiving on Bankruptcies (2 years) & Foreclosures (3 years). The biggest difference with FHA Vs. Convention is the M.I.P (the government’s version of P.M.I), you will pay an upfront premium equal to 1.750% of your loan amount (this is typically rolled into your loan amount) and a monthly premium of .80% – .85% of your original loan amount. Unlike Conventional the M.I.P (FHA’s version of P.M.I) this monthly premium never goes away, the only way to get rid of the M.I.P is to refinance to a Conventional loan. The other benefit that an FHA Loan provides is a very low rate, many times the FHA rate is lower than Conventional regardless of score. The government supplements the rates so the payments are manageable.

A – Credit Score requirement 580+ (this score can vary by lender)

B Down payment requirement 3.50%

C – Max loan amount for this region is $356,36

Jumbo Loans

(Portfolio Loan) Unlike Conventional or FHA loans that are considered mortgage backed securities and are regulated by the federal government, a Jumbo loan is considered a portfolio product. This means that there are no universal guidelines, each lending institution writes their own guidelines, as long as they follow state & federal usury laws the lender can do anything they want. Jumbo loans are loans that exceed the max lending limit for that region, in our case it would be any loan amount that exceeds $548,000. Because the lending institution doesn’t have any reps or warrants (like Conv & FHA loans do), the guidelines are more restrictive than any other loan program we offer. Typically, these loans require a much stronger borrower with a min of 20% (or more) down and many exclude first time buyers. They also typically come with a higher interest rate and usually require a discount/origination point(s). This is by far the most difficult loan to qualify for, they have tighter debt/income ratios and are reserved for experienced borrowers.

A. Credit Score requirements 740+real estate concept

B. Down payment requirements 20% – 25%

C. Max loan amounts vary by lender but are normally $3,000,000 or less.

 

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The First-Time Buyers Guide To Understanding What Program Is Right For You | Rock Mortgage — Houston, Texas