mortgages explained (very high level)

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The vast majority of Real Estate transactions involve a mortgage.  A secured loan backed by the Real Estate property (called the Subject property) they are buying.  Mortgages can be grouped into three categories: Conventional; Government; Special Program. We'll explain the first (most common) two types.

Conventional loans are the most popular but are a little harder to get than the Government-backed FHA loans.

Conventional loans can be further broken down in Conforming and Non-Conforming.

Conforming loans are generally maxed at $766,550. So if your purchase is much higher than that, you'll need to put a higher down payment to keep the laon/mortgage amount under the limit imposed.  High-cost counties can be exempt upto $1,149,825.  These conforming loans generally require a 20% downpayment; anything less will usually require mortgage insurance.

Non-Conforming loans are loans that don't fit in the general mold. These include loans for borrowers with poor credit, properties difficult to appraise, loans with minimal documentation required. Be careful with these loans and make sure you fully understand all the terms and conditions before signing.

Government loans are loans that are either insured or guaranteed by a government agency.  The most common government loans are FHA, VA, and USDA.

FHA loans are originated (funded) by private lenders but are regulated and insured by the Federal Housing Administration (FHA).  Typically, these loans are selected by borrowers who require a lower down payment - FHA usually requires 3.5% down payment. The drawback to the FHA loan is that the program requires the borrower to purchase mortgage insurance (cost) which is added to the monthly mortgage payment.

VA loans are available only to veterans, servicemembers, and surviving spouses. The Department of Veteran Affairs (VA) guarantees the loan made by private lenders. This loan type does not require a monthly insurance payment but does require an upfront payment at closing.  Low or zero down payment is possible.

USDA loans are available for low-to-medium income borrowers in rural areas. This loan type is sort of a hybrid between the FHA and VA in that it offers zero down payment, has an up front fee paid at closing, and it also has a built-in mortgage insurance premium.

You are free to work with your own financial institution or mortgage broker.  However, if you need to find a mortgage broker, we work with several and would be happy to refer you to one.  Mortgage Brokers work with many lenders offering a wide range of loan options.

Once matched for a mortgage type, your mortgage broker will provide you with a pre-qualification letter which will need to accompany your purchase offer.  Therefore, it is imperative to obtain this letter prior to viewing any properties.