Programs & Products

Fannie Mae and Freddie Mac control the conventional, conforming loan market, which still is the predominant type of mortgage program. Their underwriting standards are conservative, requiring a 20% down payment or private mortgage insurance. PMI has three options for costs. Borrowers may pay the mortgage insurance on a mortgage greater than 80%. The lender could deliver it on the borrower’s behalf for a fee, or it may be a combination of the borrower and lender making partial payments.

FHA insured lending program has a rich history and once again has stepped in to provide loans to borrowers with few other options. FHA’s required down payment is as low as 3.5% and has very accommodating underwriting standards, though the loan application process does require more steps. The borrower pays a mandatory mortgage insurance premium both upfront at closing and throughout the loan until the loan to value drops to 78% or less, but not before a minimum of five years of monthly MIP payments are made. Veterans may use their eligibility certificate for a partially guaranteed VA loan for their principal residence with little or no cash required at closing. Veterans pay an upfront funding fee for the government guarantee but can be financed into the loan. The for-profit lender must lend a minimum of four times the amount of the government guarantee.

The USDA Rural Development loan program offers 100% loan to value mortgage loans, like the VA, and their loan application and underwriting processes are similar to FHA’s. They promote homeownership in areas of the country that support agriculture.

In the mortgage industry, we define a mortgage product as the length of the term and the features associated with that term. The most basic, popular, and familiar term and features would be a 30-year fixed rate. When the mortgage industry talks about TYPES of mortgages, it refers to FHA, VA, USDA, and conventional loan programs. Within each of these types of programs, one will generally find various loan products. Today, and as far back as one can remember, the 30-year fixed-rate, level-payment, fully amortizing mortgage loan has been the predominant choice for borrowers. There are many other types of loans. Lenders aim to meet a perceived market need by varying how the interest rate is determined or how the monthly payment determines borrowers’ choice. However, for most people, the predictable, comforting reassuring nature of the 30-year fixed-rate loan suits many homeowners.

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