INSIDE INFORMATION
THE 411 ON HOME LOANS COMPILED BY TRICIA SCHWENNESEN Homes can be one of the more expensive purchases to make, and many San Antonio homebuyers take out a loan, or borrow money from a bank or other nancial lender, using the home itself as security, sometimes called collateral. If the buyer defaults SOURCES: TOM ROMANELLA, LEGACY MUTUAL MORTGAGE VICE PRESIDENT AND SENIOR LOAN OFFICER; LEGACYMUTUAL.COM, FREDDIE MAC, U.S. CENSUS BUREAU COMMUNITY IMPACT NEWSPAPER on the loan by missing payments, then the lender can take the home as payment. Home loans are often mistakenly called mortgages.
6 COMMON TYPES OF HOMES LOANS Home loans vary based on credit worthiness, your credit score, the down payment amount, the length of time on the loan and other variables. Below are six common home loans.
CONVENTIONAL
FHA
JUMBO
With a conventional loan , a buyer can purchase a home with as little as 3% down with a minimum credit score of 620 to qualify for the loan. A higher credit score will often get a buyer better loan terms. A buyer can forgo buying private mortgage insurance, or PMI, if they put at least 20% down.
FHA loans are insured by the Federal Housing Administration and o er a little more leeway for the buyer. Anyone can apply for an FHA loan, which can allow a buyer to retain a loan with a credit score as low as 580 and a down payment of as little as 3.5% , said Tom Romanella, Legacy Mutual Mortgage vice president and senior loan o cer.
Jumbo loans are used to purchase a high-value property, or anything over the conforming loan limit in Texas—and many other places—of $647,200. To qualify, buyers need higher credit scores, a lower debt-to-income ratio and reserves. Jumbo loans are backed by private investors versus a federal agency, such as Freddie Mac or Fannie Mae.
PORTFOLIO
USDA
VA
With a portfolio loan , a lender—often a local lender— loans money to a borrower and keeps the debt in their portfolio to earn consistent interest on the loan. The loan is not sold to other lenders like a lot of conventional loans.
USDA loans are insured by the United States Department of Agriculture. USDA loans have lower mortgage insurance requirements than FHA loans and can allow a borrower to buy a home with 0% down . Borrowers must meet income requirements, meet eligibility by county and purchase their home in a suburban or rural area to qualify for the loan.
The Department of Veterans A airs insures VA loans , which can allow a buyer to get into a home with $0 down, lower interest rates and no PMI . To qualify for a VA loan, a buyer must meet service requirements in the Armed Forces or National Guard. A buyer may also have to pay a funding fee if they do not meet certain disability criteria.
SPEAKING
HISTORICAL INTEREST RATES
COSTS OF OWNING A HOME
Federal agency Freddie Mac tracks annual averages over the past 20 years for 30-year xed mortgages.
THE LINGO
Terms homebuyers may run into during the loan process.
BY COUNTY Housing units (July 1, 2021)
Adjustable-Rate Mortgage (ARM): a mortgage with an interest rate that changes during the life of the loan according to movements in an index rate Appraisal: an estimate of the market value of real property that can help determine sales price Credit Score: the three-digit number based on credit reports that helps lenders gauge how likely a buyer is to make payments on a home loan Fixed-Rate Mortgage (FRM): mortgage interest that is xed for the duration of the loan Mortgage insurance premium: On an FHA loan, the borrower must pay a MIP to protect the lender from losses when the down payment is less than 20%. Similar to private mortgage insurance Mortgage: a legal document that pledges the property to the lender as security for the loan
2 0 3 4 5 6 7 8
805,863 74,277 67,121
6.54%
6.34%
Owner-occupied housing unit rate (2016-20) Median selected monthly owner costs with a mortgage (2016-20)
58.5% 74.9% 77.3%
4.54% 4.32%
5.53%
$1,524 $1,858 $1,626
3.66%
2.96%
Median selected monthly owner costs without a
$497 $568 $511
mortgage (2016-20)
*AS OF MAY 30
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