Frequently Asked Questions

A conventional loan is a mortgage loan that's not backed by a government agency. ... Conforming conventional loans follow lending rules set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Government-insured loan

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration, or FHA for short. Popular with first-time homebuyers, FHA home loans require lower minimum credit scores and down payments than many conventional loans.

Jumbo loan
A jumbo loan (or jumbo mortgage) is a type of financing where the loan amount is higher than the conforming loan limits set by the Federal Housing Finance Agency (FHFA). The 2020 loan limit on conforming loans is $510,400 in most areas and $765,600 in high-cost areas

What are the different types of mortgages?
There are three main types of mortgages: conventional, government-insured, and jumbo loans, also known as non-conforming mortgages.

How does the Federal Reserve affect mortgage rates?
Variable rates usually move in the same direction as the federal funds rate, so adjustable-rate mortgages would be affected. The federal funds rate, however, doesn't directly affect long-term rates, which include financial products like 30-year fixed-rate mortgages; those tend to move with the 10-year Treasury yield.

Refinancing is the process of replacing an existing mortgage with a new loan. Typically, people refinance their mortgage in order to reduce their monthly payments, lower their interest rate, or change their loan program from an adjustable rate mortgage to a fixed-rate mortgage.

What do refinance means?
Loan refinancing refers to the process of taking out a new loan to pay off one or more outstanding loans. Borrowers usually refinance in order to receive lower interest rates or to otherwise reduce their repayment amount.

When should you refinance?

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Can you negotiate refinance rates?
Simple answer, yes. There are some lender fees that you can negotiate, such as application fees, processing fees and the origination fee. Also, comparison shoppers can always ask their preferred lender to match a lower APR from another lender.

What happens when you refinance?
Refinancing a mortgage involves taking out a new loan to pay off your original mortgage loan. In many cases, homeowners refinance to take advantage of lower market interest rates, cash out a portion of their equity, or to reduce their monthly payment with a longer repayment term.

Who qualify for 2o3k loans?
Generally, most applicants who would qualify for an FHA loan will be approved for a 203k loan, too. You must have 1) a 580 credit score (some lenders require 620-640); 2) a 3.5% down payment, based on purchase price plus repair costs; 3) adequate income to repay the loan; 4) U.S. citizenship or lawful permanent residency. In addition, you must be purchasing a home you plan to live in.

How 2o3k loans work?
The 203k process includes a few extra steps compared to a standard FHA loan. 1) Apply; 2) Get approved; 3) Find a contractor; 4) Get repair bids; 5) Determine your final loan amount which includes purchase price plus all final bids; 6) Fulfill underwriting conditions; 7) Close the loan; 8) Complete all repairs; 9) The mortgage company pays the contractor from a designated escrow account created at loan closing with funds from the loan; 10) Final inspection; 11) Move in.

What do 2o3k cover?
The 203k loan covers the full purchase price of the home plus any eligible repairs (non-structural repairs for the u0022Limited 203ku0022 program). For example, if the home price is $250,000 and $20,000 in repairs are needed, the new loan will be $270,000 plus a required contingency or u0022bufferu0022 percentage.

What is the maximum 203k loan amount?

You can borrow up to 110 percent of the property's proposed future value, or the home price plus repair costs, whichever is less. But note that your total purchase price plus repair costs must still fall within FHA loan limits for the area. Look up your local limit here.

Is a 203k loan worth it?
A 203k loan can be well worth the extra effort, especially if you can buy a home at a discount. For instance, a buyer pays $200,000 for a run-down home, but does $20,000 in repairs. Because the home is now in u0022turn-keyu0022 condition, it would be worth $240,000 on the open market. The buyer gains $20,000 in equity immediately. This scenario is not uncommon in today's market.

How long do you have to live in a house with a 203k loan?
You must live in the home as your primary residence for 12 months before renting it out or selling.

How long does it take for a 203k loan to close?
It will likely take 60 days or more to close a 203k loan, whereas a typical FHA loan might take 30-45 days. There is more paperwork involved with a 203k, plus a lot of back and forth with your contractor to get the final bids. Don't expect to close a 203k loan in 30 days or less.

Whole Sale
Wholesaling is based on buying and selling houses very quickly without making any repairs. A wholesaler will get houses under contract well below market value and then sell the houses or assign the contracts to another investor.

Rent / Releasing
The difference between lease and rent is that a lease generally lasts for 12 months while a rental agreement generally lasts for 30 days.  That means the landlord can't raise the rent without your written consent or evict you without cause, and you can't stop paying rent or break the lease without consequence.