MORTGAGE FUNDING

Here are just a few links to other companies that we've either worked with in the past or heard good things about.  

Re-sale Homes Lending:

Achieva Credit Union – Josh Callens  (239) 471-3567

Prosperity Home Mortgage – Mike Steele (239) 571-6943

Mortgage One - Tracy VanLandschoot  (239) 471-3696

Land Lending:

Achieva Credit Union – Josh Callens  (239) 471-3567

Bank of the Ozarks – Rebecca Myers  (239) 210-2300

Lake Michigan Credit Union – David Collins (239) 908-5949

New Construction & Re-sale Homes Lending:

Achieva Credit Union – Josh Callens  (239) 471-3567

Regions Bank – Jackie Glover (239) 945-2488

Lake Michigan Credit Union – David Collins (239) 908-5949

Capital Bank – (239) 443-3689 - 506 Cape Coral Pkwy. E., Cape Coral, FL 33904

Fifth Third Bank – (239) 908-5949 - 1600 Cape Coral Pkwy., E., Cape Coral, FL 33904

CONVENTIONAL LOAN

A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate.

Mortgage

Mortgages can be defined as either government-backed or conventional. Government agencies like the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) insure home loans, which are made by private lenders. This insurance is paid for by fees collected from mortgage borrowers. This backing is paid for by borrowers.

Mortgages not guaranteed or insured by these agencies are known as conventional home loans. They include:

●     Conforming loans

●     Non-conforming loans

●     Jumbo loans

●     Portfolio loans

●     Sub-prime loans

Conventional Loans Explained

Conforming:  About half of all conventional loans are called “conforming” mortgages, because they conform to guidelines established by Fannie Mae and Freddie Mac. These two government-sponsored enterprises (GSEs) buy mortgages from lenders and sell them to investors. Their purpose is to make mortgages more widely available. All conforming mortgages are also conventional mortgages. 

Non-conforming:  Home loans that do not conform to GSE guidelines.  

Jumbo loans:   Non-conforming loans that are larger than loan limits set by the GSEs. 

Portfolio loans:  Non-conforming conventional loans held by mortgage lenders on their own books. Because lenders can set their own guidelines for these loans and do not sell them to investors, these products may have features that other mortgages do not. For example, a portfolio lender might allow a borrower to use investments like stocks and bonds as security for a mortgage for which she would not otherwise qualify.

Sub-Prime:  Non-conforming conventional home loans marketed to borrowers with low credit scores. They typically come with high interest rates and fees. The government has created special rules covering the sale of such products, but they are not government-backed.

Conventional Mortgage Benefits

●     Higher loan amounts (up to $424,100)

●     No up-front private mortgage insurance (PMI).

●     Flexible guidelines on the homes condition

●     PMI payments cancel when the LTV reaches 78%

●     NO PMI with 80% loan-to-value ratio

●     Mortgage insurance is less expensive (0.51% vs 0.85% with FHA)

●     3% down payment for conventional 97% LTV loan

Conventional Mortgage Disadvantages

·         Reserve funds are often required

·         620 credit score requirement (higher than FHA)

·         Large down payment 5%-20% (Unless you qualify for a Conventional 97 loan which requires a 3% down payment)

·         Higher interest rates

·         More difficult to qualify for than FHA

FHA LOAN (Federal Housing Administration)

An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans.

All these factors make FHA loans popular with first-time homebuyers.

FHA Loans Explained

As of 2019, you can borrow up to 96.5% of the value of a home with an FHA loan (meaning you'll need to make a down payment of only 3.5%). You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA loan provided you can make a 10% down payment. With FHA loans, your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance.

While Federal Housing Administration Loans (FHA Loans) demand lower down payments and credit scores than conventional loans, they do carry other stringent requirements.

It’s important to note that the Federal Housing Administration doesn’t actually lend you money for a mortgage. Instead, you get a loan from an FHA-approved lender, like a bank, and the FHA guarantees the loan. Some people refer to it as an FHA insured loan, for that reason.

You pay for that guarantee through mortgage insurance premium payments to the FHA. Your lender bears less risk because the FHA will pay a claim to the lender if you default on the loan.

Mortgage Insurance Required

Premiums:  An FHA loan requires that you pay two types of mortgage insurance premiums—an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP (charged monthly). The Upfront MIP is equal to 1.75% of the base loan amount (as of 2018). You pay this at the time of closing, or it can be rolled into the loan. If you’re issued a home loan for $350,000, for example, you’ll pay an UFMIP of 1.75% x $350,000 = $6,125. The payments are deposited into an escrow account set up by the U.S. Treasury Department, and the funds are used to make mortgage payments in case you default on the loan.

Monthly Payments: Despite the name, you make Annual MIP payments every month. The payments range from 0.45% to 1.05% of the base loan amount, depending on the loan amount, length of the loan, and the original loan-to-value ratio (LTV). The typical MIP cost is usually 0.85% of the loan amount. If you have a $350,000 loan, for example, you will make annual MIP payments of 0.85% x $350,000 = $2,975, or $247.92 monthly. This is paid in addition to the cost of UFMIP.

 

FHA Loan Benefits

●     Low down payment requirement of 3.5%

●     The down payment and closing costs can be given as a gift.

●     Easier to get approved for than conventional loans.

●     Lower credit scores accepted (580 credit score and higher)

●     Lower mortgage interest rates than conventional loans.

●     Reserve funds not required.

FHA Loan Disadvantages

●     Lower maximum loan limits

●     MIP required for the life of the loan if a borrower puts down less than 10%

●     Mortgage insurance required even if putting 20% down

●     Can only purchase condos that are FHA approved.

●     Mortgage insurance monthly cost is higher

 

Special Considerations

Your lender will evaluate your qualifications for an FHA loan as it would any mortgage applicant. However, Instead of using your credit report, a lender may look at your work history for the past two years as well as other payment-history records, such as utility and rent payments. You can qualify for an FHA loan if you’ve gone through bankruptcy or foreclosure, provided you’ve re-established good credit. In general, the lower your credit score and down payment, the higher the interest rate you’ll pay on the mortgage. 

Keep in mind, when you buy a home, you may be responsible for certain out-of-pocket expenses such as loan origination fees, attorney fees, and appraisal costs. One of the advantages of an FHA mortgage is that the seller, home builder or lender can pay some of these closing costs on your behalf. If the seller is having a hard time finding a buyer, they might just offer to help you out at the closing as a deal sweetener.

 

FHA Loans vs. Conventional Loans
	FHA LOAN	CONVENTIONAL LOAN
Minimum Credit Score	500	620
Down Payment	3.5% with credit score of 580+ and 10% for credit score of 500 to 579	3% to 20%
Loan Terms	15 or 30 years	10, 15, 20, or 30 years
Mortgage Insurance	Upfront MIP + Annual MIP for either 11 years or the life of the loan, depending on LTV and length of loan	None with down payment of at least 20% or after loan is paid down to 78% LTV
Mortgage Insurance Premiums	Upfront: 1.75% of the loan + Annual: 0.45% to 1.05%	PMI: 0.5% to 1% of the loan amount per year
Down Payment Gifts	100% of down payment can be a gift	Only part can be a gift if down payment is less than 20%
Down Payment Assistance Programs	Yes	No

Decide What's Best for You

While an FHA loan may sound great, it’s not for everybody. It won't help those with credit scores less than 500. On the opposite end, aspiring homeowners who can afford a large down payment may be better off going with a conventional mortgage, as they could save more money in the long run through the lower interest rates and mortgage insurance premium that conventional lenders provide.

As the Federal Housing Administration puts it, an FHA loan "won’t accommodate those who are shopping on the higher end of the price spectrum – nor is it intended to. The FHA loan program was created to support 'low- and moderate-income home buyers,' particularly those with limited cash saved for a down payment."

VA LOANS  (Veterans Administration)

A VA loan is a mortgage loan in the United States guaranteed by the United States Department of Veterans Affairs (VA). The program is for American veterans, military members currently serving in the U.S. military, reservists and select surviving spouses (provided they do not remarry) and can be used to purchase a primary residence which can be a single-family home, condominium, multi-unit property, manufactured home and new construction.

VA Loans Explained

Down payment: The basic intention of the VA home loan program is to supply home financing to eligible veterans and to help veterans purchase properties with NO down payment.

Lenders: The loan may be issued by qualified lenders as the the VA does not originate loans, but sets the rules for who may qualify, issues minimum guidelines and requirements under which mortgages may be offered and financially guarantees loans that qualify under the program.

 

VA Loan Benefits

·         No Down payment required

·         No Mortgage Insurance required

·         No minimum credit score

·         Competitive Interest rates

VA Loan Disadvantages

·         Primary home only

·         Up front  loan funding fee and others fees between 1.25 and 3.30%

·         Complicated rules and requirements can be confusing

·         Only approved Lenders

Fees

A VA-insured loan requires a funding fee to help defray the costs of loans that default. That’s a one-time upfront charge that's between 1.25% and 3.3% of the loan amount, depending on your down payment, length and branch of military service, and whether you have used your VA loan benefit before. The fee is often rolled into the loan amount, which makes your payment higher and adds to the interest you pay over the life of the loan.

Veterans who receive VA disability compensation are exempt from having to pay the funding fee, according to the Veterans Affairs department.

Credit score standards

You may hear lenders or the Department of Veterans Affairs suggest that VA-insured loans have no minimum credit score and no maximum debt-to-income ratio. That may be true as far as the VA is concerned, but it’s been said, not so much in the real-life world of lenders.  The minimum will vary, but most VA-approved lenders are likely considering credit score.

Debt-to-income ratios

VA marketing material says there is no maximum debt-to-income ratio, but it also says a “lender must provide compensating factors if the total debt ratio is over 41%.”

Advantage or  Not

It can be difficult to know if there is actual benefits to certain programs and loan types.   To make contact with a qualified lender that is approved to make VA loans and who will work with you to compare mortgage opportunities and consider your personal situation is prudent.  A second lender opinion can be good also.

CONSTRUCTION LOANS

Mortgages are easy to find, but there’s usually a catch: you can only borrow money to buy a place that already exists. Construction loans are different because they can fund everything needed for a new home, garage, or business structure.

·         They can also work when buying land

·         They can be used for an existing home renovation

Construction loans are less popular than standard home loans, but they are available from numerous lenders. If you’re thinking of building, learn about the basics and find out how each lender handles the specifics.

Construction Loans Explained

A construction loan is a short-term loan for real estate. You can use the loan to buy land, build on property that you already own, or renovate existing structures if your program allows. Construction loans are similar to a line of credit because you only receive the amount you need to complete each portion of a project. With construction loans, you only pay interest on the amount borrowed (as opposed to a standard loan, where you take 100% of the money available up front and start paying interest on the entire balance immediately).

Payments: During the construction phase, you typically make interest-only payments (or no payments at all, in some cases) based on your outstanding loan balance. 

Disbursements to contractors: As you reach milestones for your project, you or the builder can request draw payments for completed work. An inspector must verify that the work was done (but inspectors don’t necessarily evaluate the quality of work), and a disbursement goes to the builder if all is well.

Temporary funding: Loans typically last less than one year, and you pay them off with another "permanent" loan. The construction loan typically ends once construction is complete. To retire the loan, you obtain an appraisal and inspection on the completed property and refinance into a more suitable loan.

Since construction loans have higher (often variable) interest rates than traditional home loans, you don’t want to keep the loan forever anyway.

There are two ways to handle the temporary nature of these loans:

 

●     Apply for a new loan after building is completed. You will need to qualify as if you’re applying for a new mortgage. As a result, you need income and creditworthiness to get approved.

●     Arrange both loans up front (also known as single-closing). This approach may minimize closing costs because you bundle the loans together. After construction, you would end up with a standard home loan (like a 15-year or 30-year fixed-rate mortgage). This may also be preferable if you aren’t confident about getting approved after construction.

Stages: You can use funds from a construction loan for almost any stage of your project, including purchasing land, excavation, pouring a foundation, framing, and finishing. You can also build garages, basic sheds, and other structures, depending on your lender’s policies.

Down payment: As with most loans, don’t count on borrowing 100% of what you need. Most lenders require that you put some equity into the deal, and they may require at least 20% down. You can, of course, bring money to the table, but if you already own land you can use the property as collateral instead of cash.

LAND LOAN

Buying land allows you to build the home of your dreams or conserve a slice of nature. However, land can be expensive in high-demand areas, so you may need a loan to fund your land purchase. You might assume that land is a safe investment but lenders see land loans as risky, so the approval process can be more cumbersome than standard home loans.

The ease and cost of borrowing will depend on the type of property you’re buying:

·         Land that you intend to build on in the near future

·         Raw land that you don’t intend to develop

For the most part, land loans are relatively short term loans, lasting two to five years before a balloon payment is due. However, longer term loans exist (or you can convert to a longer term loan), especially if you’re building a residential home on the property.

Finished  Lots vs. Raw Land

If you’re buying a lot that already has utilities and street access, you’ll have an easier time getting approved.

Raw land: Raw land can still be financed, but lenders are more hesitant (unless that’s typical for your area — for example, some areas rely on propane, wells, and septic systems). It’s expensive to add things like sewer lines and electricity to your property, and there are numerous opportunities for unexpected expenses and delays.

Down payment: If you’re buying a lot (in a developing subdivision, for example), you might be able to put down as little as 10 or 20 percent. For raw land, plan on a minimum of 30 percent down, and you may have to bring 50 percent to the table to get approved.

Loan features: Finished lots are less risky for lenders, so they’re more likely to offer single-step construction loans that convert to “permanent” (or 30-year) mortgages after construction is completed. With unfinished lots, lenders tend to keep loan terms shorter (five to ten years, for example).

Reducing lender risk: If you’re buying raw land, you’re not necessarily going to get a bad loan. You can improve your chances of getting a good deal if you help the lender manage risk. It may be possible to get longer term loans, lower interest rates, and a smaller down payment requirement. Factors that help include:

·         A credit score above 680, showing that you’ve  borrowed and paid off loans in the past.

·         Low debt to income ratios, indicates that you have income to make required payments.

·         A small loan amount relative property value resulting in lower payments and easier sale.

No Plans to Develop

If you’re going to buy land without plans to build a home or business structure on the land, getting a loan will be more difficult. However, there are several options to get funding.

Local banks and credit unions: Start by inquiring with financial institutions located near the land you plan to buy. If you don’t already live in the area, your local lenders (and online lenders) may be hesitant to approve a loan for vacant land. Local institutions know the local market, and they may have an interest in facilitating sales in the area you’re looking at. Although local institutions may be willing to lend, they may still demand up to 50 percent in equity and relatively short term loans.

Home equity: If you have significant equity in your home, you may be able to borrow against that equity with a second mortgage. With that approach, you might be able to fund the entire cost of the land and avoid using additional loans. However, you’re taking a significant risk using your home as collateral — if you’re unable to make payments on the loan, your lender can take your home in foreclosure.

The good news is that interest rates on a home equity loan could be lower than rates on a land purchase loan.

Know the Rules

When you see vacant land, you might assume anything is possible. However, local laws and zoning requirements limit what you can do — even on your own private property. HOA rules can be especially frustrating. Speak with local authorities, a real estate attorney, and neighbors (if possible) before you agree to buy.

If you discover any issues with a property you have your eye on, ask about making changes. You might be out of luck, or you might be able to do what you want after following the proper procedures (by filling out paperwork and paying fees). It will probably be easier if you ask for permission instead of upsetting your neighbors.