FHA 203(k) loans are a type of federally insured mortgage loans that are used to fund renovations and repairs made on damaged homes. These loans can be made on a borrower’s primary residence, at upwards of 110% of the home value, without the need of a second mortgage.
The Fannie Mae HomeStyle® Renovation mortgage loan enables a borrower to obtain funds for either a purchase transaction mortgage or a rate/term refinance mortgage to cover the cost of repairs, remodeling, or renovations to the property.
A home equity loan is a type of loan in which the borrower uses the equity of their home as collateral. Home equity loans are often used to finance major expenses such as home repairs, medical bills, or college education. A home equity loan creates a lien against the borrower's house and reduces actual home equity.
A reverse mortgage is for seniors ages 62 and older who wish to supplement their income with home equity from their primary residence. In a reverse mortgage scenario, the borrower receives money from the lender either in a lump sum, through monthly payments, as a line of credit, or a combination of the three. Counseling by a HUD approved agency is required. The borrower may be currently delinquent on their mortgage as long as they have not been foreclosed upon. No credit or income checks are required.
USDA loans are guaranteed by the United States Department of Agriculture (USDA). These loans (also known as Rural Development loans) are designed to help low-income borrowers purchase homes in rural areas. Similar to VA loans, USDA loans often do not require a down payment and provide up to 100% financing for a home purchase or refinance (rate and term only). USDA does not allow for cash out loans.
VA loans are guaranteed by the United States Department of Veterans Affairs. They offer long-term financing to eligible American veterans. VA loans often do not require a down payment and offer up to 100% on the purchase or refinance (rate and term only) of a home. VA also offers “cash out” loans up to 100%.
FHA mortgages are loans that are insured by the Federal Housing Administration. Popular among first-time homebuyers, FHA loans are designed for low- to-moderate income borrowers. FHA loans typically have a more relaxed credit requirement than conforming loans. There is also a down payment requirement as little as 3.5% available with FHA loans. These loans can only be made for a borrower’s primary residence. FHA allows for “cash-out” refinances up to 85% of a home’s value.
A conventional, or conforming, mortgage adheres to the guidelines set by Fanny Mae and Freddie Mac. It may have either a fixed or adjustable rate. Fixed-rate mortgages have a set interest rate for the entire length of the mortgage term. An adjustable-rate mortgage (ARM) ) is usually initially fixed for a set period of time, followed by periodic adjustments according to a specific benchmark.