There are many types of loans used for home mortgages. A number of them are government guaranteed, or insured, to minimize the risk to lenders. These types of loans have specific qualification, downpayment, and rules by which to qualify, but generally can offer the home buyer some of the best rates and terms. All other mortgage loans can generally be grouped into what are called conventional loans. One very important item to understand is that you will need a loan Pre-Qualification Form from a lender to identify yourself as qualifying for a mortgage loan, and approximately how much. This simply is a brief statement or letter, usually one page, which you can use to justify any offers. Most contracts written in Arizona now require a Pre-Qualification Form to be included as part of the contract.
After you receive a mortgage loan pre-qualification form, you will need a loan approval, which comes after a lender’s mortgage underwriters review your financial, tax, and and income documentation to determine if you have fully met the requirements of the type of mortgage loan for which you pre-qualified. A loan pre-qualification form is a loan approval.
Visit the Mortgage Underwriters website to get detailed knowledge on the mortgage lending process.
VA loans came into existence in 1944 through the GI Bill of Rights. These loans provided veterans with a federally guaranteed (loan insured) home loan with no down payment. This feature was designed to provide housing and assistance for veterans and their families. For details on qualification and certificates needed to apply for a VA loan visit VA Loans, and find the needed information and forms to begin the qualification process. You also will need to select an approved VA loan lender to complete the process.
FHA Loans originated during the Great Depression of the 1930s and are insured by the Federal Housing Authority or FHA. These loans are issued by federally qualified (approved) lenders under the qualifications and terms required by FHA. The qualifications and terms tend to be considerably easier than most conventional loans. As of September 2017, FHA loans require only a 3.5% down payment and credit scores as low as 620. For further details, visit FHA Loans.
USDA loans were created, for the most part in 1991, as a way of increasing home ownership in rural areas. Since a great many areas of the Valley have grown quickly into previously known rural areas, these loans can be an excellent low cost way to finance a home in a newer developed location. The program of 100% financing plus a 2% USDA loan loss insurance fee (that often can be rolled into the loan amount) make this program an attractive option. The funding for this program is at the mercy of congress, so there are times that this program is not available pending additional funding. Talk with your Thomas Jambor Reality Solutions agent to see if the home you are seeking qualifies for this financing. For details, visit USDA Loans.
Conventional loans is a term reserved to all loans not of the above types. They can have Fixed or Variable rates, combination of both, and even variations in terms. Usually conventional loans require between 5%-20% downpayments. For a more complete definition and reasoning as to when to use this type of mortgage financing, see Conventional Loans.
Seller financing would be a situation whereby the seller is willing to finance a portion or all the financing of your home purchase. This can be a very good source of financing especially if you are in a situation of unfavorable lending terms or qualification problems. Currently there are a number of businesses that work with sellers to handle seller financing from a loan origination and servicing angle. For additional information, please see Seller Financing Explained.
For sources of mortgage financing, you have an enormous number of potential sources both online and direct.
We have a few local sources of direct lending that you may want to evaluate and can be obtained from any of our associates. These lenders have helped our previous Clients at which our Clients have reported as having a very good experience.
If you do seek out your own lender, just make sure they have experience and a track record of getting mortgage loans approved and closed!