Successfully purchasing a home requires finding the best type of loan and terms for your situation. Several different loan products, each designed to meet a buyer's specific circumstances, are available. At Bank of the Ozarks, our experienced mortgage lenders will work with you to provide the best loan for your needs.
The following is some basic information to help you understand various elements involved in the mortgage loan process.
Types of Home Loans
There are three basic types of loans:
CONVENTIONAL - CONFORMING AND JUMBO
Conforming loans are secured by government-sponsored entities like Fannie Mae and Freddie Mac. These companies do not lend money directly to you, but work with lenders across the country, like Bank of the Ozarks, to offer mortgage loans to meet your needs. There are limits to the amount of these loans based on national-average home prices.
Jumbo loans are funded by private investors and are for loan amounts higher than the limits of a conforming loan. Jumbo loans usually carry a higher interest rate and some additional underwriting requirements.
Government-insured loans are designed to help people qualify for a home loan if they have low to moderate income and limited savings. Features include low to no down payment options; flexible income, debt and credit requirements; and down payment and closing costs that may be funded by a gift, grant or secured loan. The following federal government agencies guarantee qualified loans provided by lenders such as Bank of the Ozarks:
FHA (Federal Housing Administration) - while a good option for some, there is one caveat to this type of loan. You must pay an up-front mortgage insurance premium of 1.5% of the loan balance, along with a monthly mortgage insurance fee. Applications taken on or after October 4, 2010, will have an up-front funding fee of 1%, along with the monthly mortgage insurance premium.
VA (Department of Veterans Affairs) - available to veterans, reservists and those on active duty. A funding fee is charged for these loans:
- 0.75% of the loan amount for refinancing from a VA loan to a VA loan
- 2.15% if you are using your VA eligibility for the first time
- 3.3% if you have had a previous VA loan
USDA Loans - These are government-insured loans that allow 100% financing in rural markets. There is a 2% financed Guarantee fee charged by USDA and can be amortized over the life of the loan. In addition USDA has an annual fee of .30%; this fee must be paid for the life of the loan, not only until the loan reaches 78% or less.