Conventional loans follow guidelines set forth by Fannie Mae and Freddie Mac and provide affordable residential financing.
• Conforming loan limits up to $417,000 in all areas
• Conforming high balance loans up to $625,500 in many areas, including Los Angeles and Orange county
• Down payments as low as 5% down (can all be gift funds)
• Fannie Mae and Freddie Mac establish standard guidelines regarding credit, income requirements, and down payment
• Property types: Single-family residences, condominiums, 2-4 unit properties
Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development (HUD) which insures the loan and expands the ability to obtain a home mortgage.
FHA loans allow the following:
• Down payments as low as 3.5% (can all be gift funds)
• Low closing costs – FHA has competitive interest rates because the Federal government insures the loans (http://portalapps.hud.gov)
• Lower credit qualifications – you don’t need perfect credit
• Allows non-occupant co-borrowers
• Loans up to $625,500 in many areas, including Los Angeles and Orange county
Jumbo loans have loan amounts exceeding the loan amount limitations set forth by Fannie Mae and Freddie Mac.
• Typically jumbo loans have loan amount amounts over $625,000 to $10,000,000
• Require higher down payments
• Require higher FICO credit scores
• Maximum debt-to-income at 43%
Reduced Doc Loans
Reduced documentation loans are suitable for specific borrowers:
• Good to excellent FICO credit scores (740+)
• Higher down payment
• Higher reserves at the close of escrow
Multi-family loans are for income properties, i.e. apartments
• 5+ units on property
• Bank determines income based on debt-to-service ratio of 1.2-1.5 of net cash flow – the bank will determine the net income in contrast to the payment, and the income needs to exceed the payment by an amount of 1.2 vs. 1.0 income
• Usually requires 25% down payment
Kennedy Capital are the experts on all of the above types of financing.