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Loan Types

Below is an educational section for your reference. Feel free to read up on every type of loan we offer that is available to your or simply call our office and speak to one of our loan experts.

What is a Conventional Mortgage?

A mortgage is considered conventional if it has no federal government backing. Conventional mortgages can be either a fixed rate mortgage or an adjustable rate mortgage (ARM).

Fixed-Rate Mortgage

A fixed rate mortgage provides you with financial peace of mind, since the monthly principal payment will remain the same for the life of your loan. If you prefer the stable, predictable payments of a fixed rate loan, you can choose from an array of repayment terms of up to 30 years.

Adjustable-Rate Mortgage (ARM)

An Adjustable rate mortgage (ARM) is a great way to effectively increase your buying power. That’s because ARMs typical offer a lower initial rate than a comparable fixed rate mortgage. After the initial period, the rate can be adjusted to specific intervals. For instance, a “3/1 ARM” is fixed at an initial low rate for the first three years, and then adjusts every year based on a national index.

Characteristics of a Conventional Mortgage

Require a higher down payment than government-backed loans
Higher credit score requirements
Lower interest rate for qualified buyers

Why Use Lord Mortgage to get a Conventional Mortgage?

Better Customer Service.

What is a Jumbo Mortgage?

Are you buying a luxury single-family home or condominium? Lord Mortgage offers “jumbo” loans as high a $2.5 million or more. These loans are larger than the maximum limits for conventional mortgages set by Fannie Mae. Our programs can accommodate purchasers of primary residences, second/vacation homes and investment properties.

What is a Jumbo Loan?

Jumbo mortgages are often a confusing idea to newer prospective homeowners, but these products have the right name. The term "jumbo mortgages," coined around 30 years ago, applies to any mortgages available above "conforming" loan limits. Conforming mortgages are those eligible for purchase by Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation).

Jumbo mortgages are available to home buyers who need larger loans to complete their real estate purchases.

How Jumbo Mortgages Work:

Jumbo mortgages work like all others. The notable difference is in their size. Fannie Mae and Freddie Mac set conforming loan maximum amounts annually. Current maximums are $417,000 for most single-family homes. Should you need a higher mortgage than the current maximum, a jumbo loan is a great choice. Most qualification documents and requirements for jumbo mortgages are similar to conforming rules; income, debt and asset verification documents are usually identical.

Jumbo Mortgage Types:

Most jumbo loan products are similar or identical to most conforming mortgages. You can choose fixed-rate or adjustable-rate mortgages (ARMs). You normally have ARM options for six-month or one, three and five year loans. Even in the current "tight" credit environment, you might find a few interest-only mortgages to help you qualify based on your income and debt load. The only difference is the amount of the loan -- the minimum you can borrow is $417,001.

What is an Adjustable Rate Mortgage?

The adjustable rate mortgage (ARM) definition is a 30 year mortgage that features a lower initial fixed interest rate period, typically of 3, 5, 7, or 10 years. After the fixed-rate period expires, the interest rate becomes adjustable for the remainder of the loan term. ARMs are often named by the length of time the interest rate remains fixed. Example: In a 5/1 ARM, the “5” stands for the five-year “introductory period,” during which the interest rate remains fixed. The “1” shows that the interest rate is subject to adjustment once per year after the introductory period and for the remainder of the loan term. About the introductory period: The rate on this kind of loan tends to be lower during the introductory period, which could mean a lower starting monthly payment. However, when the introductory period ends, your rate will adjust depending on changes in the financial index to which your loan is associated. Caps: ARMs have two kinds of rate caps. Adjustment caps limit how much your rate can go up or down in any single adjustment period, limiting how much your loan payment can change when it adjusts. Lifetime caps establish a maximum, and minimum, interest rate over the entire life of a loan. If you’re considering an ARM, find out what the caps would be and then run the numbers to see if you could still comfortably afford the monthly payments allowable under the rate caps.

Advantage:

Hybrid ARMs generally offer lower rates during the introductory fixed rate period than fixed-rate mortgages.

Considerations:

After the introductory period’s fixed rate expires, the rate is subject to adjustment. The rate could increase at this point, which would also increase your payments. This can make paying your mortgage on time more difficult.

If you choose this kind of loan, be sure it includes an adjustment cap and/or lifetime interest cap. Keep in mind that many adjustment or lifetime caps would still result in payment shock, which is a term used to describe a significant increase in your monthly payment. For example, if you had a 5/1 ARM with a starting interest rate of 4.0% (and interest rates rose) and your rate increased by 2 percentage points in the first two adjustment periods, by year 7, your interest rate would be 8.0% -- so your monthly payment would double from the starting monthly payment.

What is an FHA Home Loan?

The FHA mortgage program was created to make home ownership accessible to more people, and is administered by the US Department of Housing and Urban Development (HUD). FHA does not actually lend money; it reimburses FHA lenders when borrowers default on FHA home loans. This reduces the lenders' risk, which makes them more willing to loan money, and keeps borrowers' costs down. FHA mortgage lenders offer a variety of home loans designed to meet many needs, including:

Mortgages to purchase single-family homes, condominiums and 1- to 4-unit multifamily homes (203(b) loans)
Mortgages for manufactured or mobile homes (with or without land)
Mortgages to rehabilitate or improve a home that you already own, or one that you plan to buy (203(k) mortgages)

Refinance mortgages, whether or not your current loan is with FHA

FHA mortgages are especially well-suited to meet the needs of borrowers who need to finance more than 80 percent of their home’s purchase price or appraised value. They carry advantages and drawbacks that you should be aware of before you decide that an FHA mortgage is right for you.
Advantages:

This kind of loan is helpful for applicants who don’t have a 20% down payment saved.
These loans can also help applicants who need more flexible income or credit requirements. Be aware that minimum credit scores apply so not all applicants will qualify.

Considerations:

There’s a maximum loan amount, which can vary depending on where the home is located.
FHA loan programs typically require you to pay both an upfront mortgage insurance premium (UFMIP) and a monthly mortgage insurance premium (MIP). You’ll need to factor these premiums in when you set your budget.
There tends to be a more complex approval process for an FHA loan, and often times more paperwork to fill out.
An FHA loan may help get you into a home, but it’s important to be sure the total monthly payment that comes along with the loan is one you can comfortably afford.

USDA Loans

NO DOWN PAYMENT, 100% FINANCING

We are proud to offer the U.S. Department of Agriculture (USDA) - Rural Housing Service product. The Guaranteed Rural Housing Loan Program is offered through the Rural Housing Service (RHS), an agency of the USDA. The program is designed to help low-to-moderate income families achieve homeownership in eligible communities.

PROGRAM HIGHLIGHTS

Maximum Loan to Value: Max 100% LTV based on the appraisal value. 103.63% is permitted when the guarantee fee is financed
Eligible Properties: Attached and detached SFRs, PUDs, Condos
Funds Required: No down payment required No reserves required Gift funds permitted
Credit Score: Minimum FICO Score 640

BENEFITS OF A USDA RURAL HOUSING LOAN

Rural home loans are often provided through USDA Rural Housing Loan programs. Although it is certainly not new, the USDA Rural Housing Loan program may be one of the most overlooked government home loans available. Established in 1949 by the US Department of Agriculture, its goal is to give residents of rural areas the opportunity to own a home and promote development in underdeveloped areas. There are certain eligibility requirements for both the borrower and the property to be purchased. Borrowers must meet certain income, credit and employment requirements while the home to be purchased must lie within the USDA's Property Eligibility Map. The USDA works with approved lenders in all 50 states. Since the program began, over 2.7 million rural borrowers have become proud homeowners. Here are 3 compelling reasons why this is such an outstanding prospect for anyone thinking of buying a home:

1: RURAL DOES NOT MEAN REMOTE

Please do not assume that the eligible properties are all located miles and miles from civilization. A quick check with the USDA's website will allow you to track down homes that meet the USDA funding guidelines.

2: UNPARALLELED AFFORDABILITY

USDA home loans are one of the only mortgages available other than those for members of the US military that offers no money down home loans (note: there may be some programs available in certain locations where 100% financing home loans may exist). It is an excellent option for those with lower incomes or less than perfect credit. Mortgage insurance is not required and loans can be used to purchase or refinance. Monthly payments are kept affordable, thanks to the fact that the loans are 30-year fixed rate mortgages.

3: MORE BORROWERS ARE ELIGIBLE THAN EVER BEFORE

As part of the American Recovery and Reinvestment Act that came about in 2009, the USDA home loan requirements have become more streamlined and opened the door for higher eligibility rates. Borrowers must still meet certain income requirements and provide a credit report; however, the guidelines are not as strict as they were previously. To learn more about USDA Rural Housing loans and their eligibility requirements please contact us today.

What are The advantages of a VA Home Loan?

The VA Home Loan program is the most powerful home loan program on the market for veterans and military families. These flexible, government-backed loans come with significant benefits that open the doors of homeownership to veterans who might otherwise struggle to obtain financing. s signature benefits, which include:

No Down Payment

Saving money and building credit can be difficult for service members who are constantly on the move. With the VA Loan, qualified borrowers can finance 100 percent of the home's value without putting down a dime.

No Private Mortgage Insurance

Many conventional lenders require borrowers to pay private mortgage insurance unless they're able to put down at least 20 percent, which is a tough task for many Veterans. Private mortgage insurance (PMI) is an insurance that protects lenders in case of a borrower default. With a VA Home Loan, however, there is no PMI. This is because the federal government backs all VA Mortgage Loans and assumes the risk on behalf of the borrower that is typically covered by the PMI. This VA Mortgage Loan allows you to build more equity in your house, effectively saving you thousands of dollars over the life of your mortgage.

Competitive Interest Rates

VA Mortgage rates on home loans are based on risk assumed by the bank to finance the loan. Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can offer VA loan rates that are typically 0.5% lower or more than conventional interest rates. Pair that lower interest rate with the ability to purchase a home with no money down and no private mortgage insurance and the savings start adding up significantly.

Interest-Only Mortgage (I/O)

Interest-only mortgages are adjustable-rate or fixed-rate loans, which contain an interest-only payment option during a set period in the first years of the loan, often the first 10 years. During the interest-only period, borrowers can delay making principal payments and make monthly payments that only repay interest. After the interest-only period ends, assuming that a borrower selected this option and made only interest payments, the monthly payments would significantly increase when the required monthly payments started to include principal plus interest. If there were no principal payments made during the interest-only payment period, the unpaid loan principal wouldn’t be reduced. That principal would now need to be paid back in the remaining years of the loan, in addition to the interest due on the total balance of the loan. So the payment shock would be quite significant when the interest-only period ends. In general, interest-only mortgages may be a good choice for only a small number of buyers with very special circumstances. Carefully consider payment shock when considering an interest-only payment option.

Advantages:

• This type of mortgage may be a fit for a small sub-set of buyers with fluctuating incomes, as long as they are disciplined enough to pay more than the minimum as often as they can and/or plan to pay larger amounts in the future.

Considerations:

• Because your monthly payment would only repay the interest accruing on this mortgage, the only equity you would have in your home would be the amount you paid as a down payment. You would not build equity unless the market value of your home were to increase. If the market value of your home were to decline, then you could lose part or all of your down payment. This kind of mortgage can be difficult to get because it is more of a risk for lenders. It’s critical to know the highest possible monthly payment you may have to make on this loan, and to be confident you could pay it.

When would an I/O mortgage make sense?

If you’re opting for lower starting payments to invest money into home renovations or remodeling, because you believe that these would significantly increase the home’s value and you could refinance or sell in the future.
If you know you’ll be moving before the interest-only payment term expires, and you don’t need to access the equity (your down payment contribution) from the home in order to buy a new one.
If the bulk of your income is paid in bonuses or commissions, and you want to make small monthly payments and use large income distributions to periodically pay down principal.
If you expect significant income increases in the short term, like a spouse going back to work.

WHAT IS A FIXED MORTGAGE RATE?

A fixed rate mortgage offers a straightforward, predictable monthly payment. With fixed-rate mortgages, your interest rate and your total monthly payment of principal and interest will stay the same for the entire term of the loan. That predictability makes it easier to set your budget.

ADVANTAGES OF A FIXED RATE MORTGAGE

Fixed- ate mortgages are a good choice if you:

Think interest rates could rise in the next few years
Want to keep the current rate Plan to stay in your home for many years
Prefer the stability of a fixed principal/interest payment to a payment that changes periodically (which is what happens with an adjustable-rate mortgage)

HOW TERM AFFECTS INTEREST AND EQUITY

In general, the longer the term of the fixed-rate mortgage is the more interest you will pay over the life of the loan and the higher your interest rate will be, but your monthly payments will be lower. The shorter the repayment term is, the lower the interest rate will be and the faster you’ll pay off and build equity in your home, though your monthly payments will generally be higher.

Fixed-rate mortgage loans are available in a variety of repayment terms, with 30-, 20- and 15-year fixed-rate mortgages being the most popular.

30-year fixed-rate mortgage

The 30-year fixed-rate mortgage is one of the most popular mortgages. Many people like the fixed interest rate and lower monthly payments. But since the term of the loan is long, you’ll pay more interest over the life of the loan than you would on a shorter-term mortgage, and you’ll build equity more slowly.

20-year fixed-rate mortgage

A 20-year fixed-rate mortgage helps you pay off your home faster and build equity more quickly than longer-term fixed-rate mortgages. A 20-year fixed-rate mortgage generally has a lower interest rate than longer-term home loans but higher monthly payments.

15-year fixed-rate mortgage

You generally pay a lower interest rate with a 15-year fixed-rate mortgage than you would for longer-term fixed-rate mortgage loans. You will pay less interest than you would with a longer-term loan and build equity more quickly. However, your monthly payments will be higher for a 15-year fixed-rate mortgage than they would be on a longer-term mortgage.