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Conventional vs. FHA vs. VA Loans and Mortgages

Looking for and obtaining a mortgage loan can be very challenging. Depending upon your specific needs, the process may be lengthy, confusing and ultimately disappointing. It’s imperative that you understand the differences between conventional, VA and FHA loans so you get the perfect one for you. All three loan types are issued by banks and other approved lenders.

When you apply for a home loan, you can apply for a government-backed loan such as a VA or FHA loan. Conventional loans are not insured or guaranteed by the federal government. This means that there are no guarantees for the lender if you do not repay the loan. Because of this, if you make less than a 20% down payment, you must pay for private mortgage insurance (PMI) with a conventional loan. In this way, if
you default on the loan, the mortgage insurance company ensures that the lender will be paid. Conventional loans are either conforming or non-conforming. Conventional conforming loans adhere to the rules set by Fannie Mae and Freddie Mac and are available to everyone. They are difficult to apply for because there is no government insurance so income and credit requirements are much stricter than for VA and FHA loans. Nonconforming loans also include jumbo loans, portfolio loans, and subprime loans.

An FHA loan is insured by the Federal Housing Administration (FHA). Because the loan is insured, you may qualify for a low down payment such as 3.5% of the purchase price. FHA loans have a maximum loan limit that depends on the average cost of housing in your area. As part of an FHA loan, you will pay a mortgage insurance premium (MIP) as part of the loan so that the FHA has the ability to pay the lender in the case of a loan default. Borrowers with a FICO score of less than 500 could be eligible for an FHA loan.

A VA loan is guaranteed by the Veteran’s Administration (VA). This loan is reserved for certain borrowers through VA-approved lenders so that lenders are guaranteed repayment in the case of loan default. To obtain a VA loan, you must be a current member of the US armed forces, a veteran, a reservist or national guard member, or be an eligible surviving spouse. VA mortgages are guaranteed with no money down and without the private mortgage insurance requirement. However, there is a funding fee which is a one-time charge between 1.25% and 3.3% of the loan amount.

At Superior Mortgage Company, Inc., we specialize in dozens of residential and commercial loans and provide the best products and services available. Our team can help you decide which loan fits your circumstances and answer any and all questions you may have about the process of obtaining a loan. Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Please contact us at 845-883-8200.

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Ten Questions To Ask Your Mortgage Lender

When looking for the best mortgage to fit your specific needs and situation, it is important to ask the right questions to make sure you fully understand all the aspects of your loan.

Whatever kind of mortgage you or your client need, Superior Mortgage Co., Inc. is the company to trust. We offer a wide range of mortgage products to fit your specific needs. Our VA loans offer 100% financing with all closing costs paid. We have jumbo loans up to 2.5 million, conventional loans with only 3% down, land loans, construction loans and many other loan programs. We are a mortgage company that specializes in all financial products and services related to mortgages. We are comfortable showing laymen how to navigate a variety of mortgage products and opportunities from initial contact through application and closing. We are familiar with VA, FHA, FNMA and FHLMC guidelines and regulations and residential and commercial mortgage lending practices.

Before deciding upon the best mortgage for you, there are questions to ask your prospective lender to make sure you are making the best decision. These are:

  • What type of loans do you offer and what are the qualifying guidelines for each?
  • What is the interest rate and annual percentage rate (APR)? The federal Truth in Lending Act requires lenders to give you a “good faith” estimate of the closing costs including appraisal fees, title insurance, application costs and loan-origination fees before you show up to close. The lenders you talk to must combine the fees and interest to produce an Annual Percentage Rate, showing the yearly cost of the mortgage. This will make it easier for you compare the costs of different mortgage offers.
  • What is the monthly payment going to be?
  • How large of a deposit do I need?
  • Is there a prepayment penalty?

Can you estimate and explain what fees and costs I will have to pay? Never assume that a mortgage offer is a take-it-or-leave-it deal. If you find the rate too high or the closing costs excessive, ask your lender if they can be lowered. Depending on the market and how good a credit risk you are, the lender may be willing to waive some of the closing costs. If not, you are free to secure estimates from as many lenders as possible.

  • Do you offer loan rate locks and if so, how much do you charge for them?
  • How long does it typically take for a mortgage to go through?
  • Can you guarantee you will close on time?
  • Are you going to hold this loan or sell it?

If there is anything you don’t understand or need more information about such as the size of a balloon payment at the end of the mortgage or what “points” are, ask for an explanation. If your lender is worth doing business with, they will tell you whatever you need to know. At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available.  Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Contact us at 845-883-8200.   

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