Blog with MAE Capital

Loan Products For 2018

January 8th, 2018 12:55 PM by Gregg Mower

Welcome to 2018.  I think it is a good time to review all the available loan types in today’s lending world and what they are uses for.   Although there has been changes in the industry There are still options for people to get financing for both their primary homes and their investment property.  There are creative options for those that are self-employed that don’t show all their income on their tax returns.  Of course, we have the basic home loans like FHA, VA and Conventional loans that are still priced really good for an economy that is starting to build steam.  On the end of the spectrum we have Hard MoneyLoans available for those investment properties that banks may have said no to for one reason or another.  All these loans have their purpose in today Real Estate Markets.

Let’s start a look at the most basic of loans that are used for purchasing and refinancing primary residences.  These loans are, what we in the industry call, “A” paper loans.  These loans also fall under, what the government calls, Qualified Mortgages or QM loans.  These loans are full of regulations designed to protect the consumer from lenders that may not have their best interest in mind.  One of these loan types is the Convectional loan and is the most widely used type of mortgage.  The Conventional Home loan will allow buyers to purchase home and put as little a 5% down.  A Conventional home loan is privately insured which means if you put less than 20% down you will be required to purchase mortgage insurance from a private institution.   The same would hold true for a refinance, you would need greater that a 20% equity position in order to refinance a Conventional loan without Private Mortgage Insurance (PMI).   Because the insurance is private the underwriting guidelines are a little tighter than that of the Government insured loans like FHA.   Traditionally FHA insured loans have had the full faith of the Federal Government backing these loans making them more desirable for banks to sell the loans to each other.  Thus, interest rates on these loans are little lower than their Conventional counterparts and the underwriting criteria for FHA loans are little easier as well.  So, if you have a lower FICO score (550-660) FHA will probably be your best bet as there are not additions to the interest rate with lower credit scores with the FHA loans.  FHA does come with mortgage insurance, however, with the higher Loans to Value loans it still is a lower payment than a conventional loan.   Both FHA and Conventional loans now do not require a termite report and clearance unless it is asked for in the Real Estate Contract making both loans flexible for home buyers in a tight Real estate market or if buyers are willing to buy light fixers.  The Veterans Administration loans or VA loans are only for those that have served in the military and have the eligibility required (usually 4 years in) to qualify.  The benefits of being able to use a VA loan are great, besides the fact that the Veteran does not have to put any money down at all it is fairly easy to qualify for the payment as interest rates are low for these loans, as well.  VA loans will take Veterans with credit scores as low a 550 with no money down and no mortgage insurance.  These are all considered Qualified Mortgages in the Government’s eyes and will require certain waiting periods to ensure borrowers have the ability to shop and compare and make sure the loan being offered them is good for their situation. 

Another option for home buyers under the Primary Residence type of loan is the Bank Statement qualifying loan.  These types of loans are still considered Conventional loans as they are privately underwritten.  They are specifically designed to provide an alternative way of qualifying as opposed to the traditional way of having to provide Federal Tax Returns.  These loans will require a borrower to provide 12-24 months of bank statements from their personal or business accounts or both.  They will be qualified by averaging their deposits and taking out a certain expense number and that will be the income that will be used to qualify them.  As it still falls under QM loans these loans are required to make sure the borrower has the means to make their mortgage payment that they are applying for.  Due to the fact that Private Mortgage insurance companies will only underwrite under traditional income qualifying guidelines these loans will require a 20% or more down payment.  As they are considered “higher risk” loans and interest rates are bit higher than Traditional Conventional loans and FHA loans. 

Lastly, we need to cover a sector of the market that is almost considered “Underground Funding” and that is Private Money Loans or Hard Money loans as they have been called traditionally. Private Money loans are for those investors that don’t qualify for financing under traditional bank guidelines.  Hard Money loans are used primarily on investment property both Residential and Commercial properties.  These loans are arranged by mortgage brokers with private funds from private investors (individuals) and hedge funds.  The borrower is not scrutinized as much as the property is under this type of funding and the bigger the equity position is the better chances are that an investor will fund the project.  The minimal investment required to get a Private Money Loan or Hard Money loan is 30% of the project’s value or purchase price. whichever is less.  These loans can be used to purchase Residential, Commercial, Industrial, Mixed-Use, Land, Construction projects, Churches and those properties that Banks tend to shy away from.  Hard Money loans can be used to refinance an existing project, or provide funds for construction.  

There are many different types of loans available today and can be used for many purposes.  Here at MAE Capital Mortgage we have all these loans available.  Not only do we have these loans available we have experts in guiding you to the right loan product.  As we are a Mortgage Broker we are also limited by the government on the amount we can charge for certain products thus making our loan interest rates and fees the best in the market.  We work with direct lenders and get what is called a wholesale interest rate which is lower than a retail interest rate you would get from a Banker or direct lender and we pass those saving on to you.  We know you have options out there and I would advise that you work with a team like MAE Capital Mortgage that has decades of experience that will be passed on to you in the form of knowledge and  reduced costs and fees.  Please call our offices is you have any questions regarding these loans or Real Estate we welcome the opportunity to help you with this process.    MAE Capital Mortgage 916-672-6130 or www.maecapital.com. 


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