Mortgage Loan Information
This section features mortgage program information for home buyers interested in real estate in Long Beach areas.
In today's loan market, which has been changeable and volatile, buyers are strongly recommended to obtain their loan information and pre-approval when they first begin thinking about their home search. Although the types of loans listed below may be available, the circumstances vary according to the buyer's income history, credit score (FICO score), and employment or other income status. Once pre-approval is obtained, a buyer should continue to check
The most common types of loan in the Southern California market and in this area are either a conventional loan (conforming or jumbo loan amounts), or an FHA loan.
FHA Loans
FHA loans have been in existence since the 1930's, are insured by the Federal Housing Administration, and are ideal for first-time buyers because of only requiring 3.5% down payment, as well as other advantages. Some benefits to FHA loans include: a better loan modification program; ability to easily and often less expensively refinance; low rates; and acceptance of borrowers with credit scores as low as 620. FHA loans are targeted to low- and moderate-income borrowers, but there are no income restrictions. In high-cost areas, such as
Additionally, FHA borrowers must pay an up-front insurance premium totaling 1.75 percent of the loan, which goes into FHA’s fund for repaying lenders if borrowers default. This is in addition to other usual closing costs.
A buyer also needs to know that the prospective property must qualify for an FHA loan according to FHA's list of conditions. These conditions are very specific but are not usually a problem when a house is in reasonable condition. Whether a condo, single family, duplex, triplex or four unit property, all FHA loans require owner occupancy.
Conventional Loans
Conventional loans are also more specific, particularly when a homeowner association is involved, and generally require at least 10% down, and some loans may require a 20% down, even if for an owner-occupied property. For instance, in homeowner associations, owner occupancy requirements must be met: some lenders require 51% owner occupants, some require at least 70% owner occupancy.
Conforming loan limits for both conventional and FHA loan limits are currently up to the $729,750 for the Los Angeles metropolitan area.
Jumbo loan limits are conventional loans over $729,750 and typically require a little higher interest rate.
In order to help you with your next home purchase, I have put together a simple review of some of the major mortgage programs.
Variable or Adjustable-Rate Real Estate Mortgage
With an adjustable rate mortgage, the rate of the loan can change throughout the term of the loan. Many ARMs have a short fixed period and then become truly adjustable. The rate of the loan is based on adding points to a fixed base.
Fixed-Rate Real Estate Mortgage
With this type of loan, the interest rate remains consistent throughout the term of the loan, usually 30 years.
Balloon Real Estate Loan
A balloon loan is a real estate loan where there is a lump sum due at the end of the loan. This normally encourages an individual to refinance prior to the end of the term of the loan.
Jumbo Real Estate Loans
A jumbo loan is any residential or commercial loan exceeding the guidelines of Fannie Mae and Freddie Mac.
VA Real Estate Loans
A VA loan is a loan in the United States guaranteed by the Veterans Administration. The loan may be issued by qualified lenders. The VA was designed to offer long-term financing to American Veterans or to their surviving spouses.
What are Reserves?
Reserves are the funds the lender requires the borrower to show after paying the down payment, the monthly mortgage and any impounds, and other monthly debt and living expense payments. This amount may differ from lender to lender, so a borrower should always ask that question (and it's informaton that will be disclosed when required anyway). See the Fannie Mae list of reserve funds required, below:
