Mortgage Types

How FHA loans work
With an FHA loan, you borrow money from a private, FHA-approved lender, not directly from the government. In exchange for the government’s insurance, all FHA loans require borrowers to pay two types of mortgage insurance premiums (MIP).
Upfront mortgage insurance premium (UFMIP): A one-time fee of 1.75% of the loan amount, which can be paid at closing or financed into the mortgage.
Annual mortgage insurance premium (MIP): An annual fee that is divided into 12 monthly payments. The amount depends on your down payment, loan term, and loan amount. If you put down less than 10%, you will pay this premium for the life of the loan. With a 10% or greater down payment, you pay it for 11 years.

Key requirements to qualify

• Credit score: You must have a FICO score of at least 580 to qualify for the minimum 3.5% down payment. If your score is between 500 and 579, a 10% down payment is required.
• Down payment: As little as 3.5% of the purchase price is required for borrowers with a credit score of 580 or higher. Gift funds from family, employers, or charitable organizations can often be used for the down payment and closing costs.
• Steady income: While there is no minimum income amount, you must have steady, verifiable employment and enough income to repay the loan. Lenders typically review W-2s, tax returns, and pay stubs.
• Debt-to-income (DTI) ratio: Your total monthly debt payments should generally not exceed 43% of your gross monthly income. Some lenders may allow a higher ratio with compensating factors, such as a higher credit score.
• Primary residence: The home must be your primary residence, and you must occupy it within 60 days of closing. FHA loans cannot be used for investment properties or vacation homes.
• Property standards: The home must be appraised by an FHA-approved appraiser and meet the Department of Housing and Urban Development’s (HUD) minimum property standards for safety, security, and soundness.

VA Loans

VA helps Veterans, Servicemembers, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.

VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

Reverse Mortgage Loans

A reverse mortgage allows older homeowners to convert a portion of their home equity into cash without having to sell their property. Unlike a traditional mortgage, you do not make monthly payments to a lender. Instead, the lender pays you, and the loan balance increases over time. Repayment of the loan is typically not required until the borrower moves out, sells the home, or passes away.

How a reverse mortgage works
With a reverse mortgage, the loan amount is based on your age, current interest rates, and the home’s value. The older you are, the more you can borrow. You can receive the money in several ways:

• Lump sum: A single, one-time payout at closing. This is generally the only option for a fixed interest rate.
• Monthly payments: Either a fixed monthly payment for a set number of years (term) or for as long as you live in the home (tenure).
• Line of credit: A revolving line of credit that you can draw from as needed until the limit is exhausted.
• Combination: A combination of a line of credit and monthly payments.

While you receive funds, the interest and fees are added to your loan balance each month, causing the total amount you owe to grow. You keep the title to your home, but you are still responsible for paying property taxes, homeowners insurance, and for maintaining the property.

Types of reverse mortgages
The three main types of reverse mortgages are:

• Home Equity Conversion Mortgage (HECM): The most common type of reverse mortgage, HECMs are insured by the Federal Housing Administration (FHA). They can be used for any purpose, and the maximum loan amount is capped. All applicants for an HECM must undergo counseling with a HUD-approved agency.
• Proprietary reverse mortgages: These are private loans from a lender and are not backed by the government. They are often called “jumbo” reverse mortgages and are for high-value homes where the loan amount needed exceeds the FHA’s HECM limit.
• Single-purpose reverse mortgages: Offered by some state or local government agencies and non-profit organizations, these are the least expensive option. However, the funds can only be used for a specific purpose, such as home repairs or property taxes.

Requirements and risks
To qualify for a reverse mortgage, you generally must be at least 62 years old and have a significant amount of equity in your home (at least 50% for HECMs).