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Selecting the Type of Loan

Selecting the Type of Loan. Based on Mortgage Loan Insurance FHA - Federal Home Administration VA - Veterans Administration Conventional Based on Program VHDA- Virginia Housing Development Authority

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Selecting the Type of Loan

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  1. Selecting the Type of Loan Based on Mortgage Loan Insurance • FHA - Federal Home Administration • VA - Veterans Administration • Conventional Based on Program • VHDA- Virginia Housing Development Authority • Assumptions - Assumes an existing loan with all existing terms - approval from lender is required.

  2. Common Types of Mortgages • Fixed Rate • 30 year, 15 year • Step Rate (“Buy Down”) • 30 year, 15 year Lease Purchase • Adjustable Rate (ARM)

  3. Loan Programs • Local / State Programs (PW Coop. Exten. / VHDA) • Nehemiah / HART / Future Assistance • FHA – Federal Housing Administration • Conventional • VA – Veterans Administration • FHA ARM • Subprime Lending

  4. Conventional Financing • 0-5% down payment depending on program • Can be gifted or borrowed from a secure asset • No Income Limitations • May require Two Months House payment in reserve • Minimum credit score = Middle 620 • Maximum Loan amount up to $333,700

  5. Conventional Financing • Fixed 30/25/20/15/10 Year • Adjustable Rate Mortgages 3/1, 5/1, 1/1 • Eliminate Private Mortgage Insurance with a 1st and a 2nd combination • 80% first mortgage, 15% second mortgage, 5% down payment combined Loan to Value 95% with no mortgage insurance • Example

  6. Sales Price Down Payment (80/15/5) 1st Mortgage (80%) 1st Mortgage Payment (6.5%) 2nd Mortgage (15) 2nd Mortgage Payment (8.875%) Taxes & Ins Total Payment 1st Mortgage (Std. 95/5) 1st Payment Mortgage Ins. Taxes & Ins. Total Payment $100,000 $5,000 $80,000 $505 $15,000 $119 $120 $744 $95,000 $600 $62 $120 $782 Example

  7. VA – Veterans Administration • Zero Down Payment • Seller can pay 100% of your closing costs and pre-paids (4% total) • Maximum Loan amount $240,000 – Jumbo up to $333,700 (effective 1/11/04; 25% down for $$ above $240K) • Requires Owner Occupy Property • Generous Single 41% debt ratios allowed • Can be used more than once (Special Rqmnts) • Funding Fee • DAP eligible

  8. FHA – Federal Housing Administration • Maximum Loan Amounts per County (effective 1/1/2004) • Fairfax - $290,319 • Prince William - $290,319 • Stafford - $290,319 • Minimum Down Payment (3%) • FHA ARM • ALL of Down Payment/Closing Cost can be Gifted • No Income Limitations • DAP Program Eligible

  9. FHA ARM • Maximum Interest Rate adjustment per year – 1% above the start rate • Maximum Life Time Interest Rate Adjustment – 5% above the start rate • Index – 1 Year Treasury Bill • Margin = Fixed for Life of Loan, ranges 2% - 2.875% • ARM will either change to the 1% cap or the Index + the margin, whichever is less

  10. FHA 1Yr. ARM vs. 30 Year Fixed

  11. Alternative Lending • Up to 100% Financing Available • Adjustable Rate Mortgages: 2/28, 3/27 • Prepayment Penalty • Lower Qualifying FICO Scores • Unique Underwriting Necessary • Bandage Loan used to allow borrowers with problems to correct to standard underwriting guidelines

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