Legacy offers many different types of mortgages. Let us assist in finding the right one for you.
01 Conventional Mortgages
A conventional mortgage, also referred to as conforming, is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming loans.
A conforming loan simply means the loan amount falls within maximum limits set by Fannie Mae or Freddie Mac, government agencies that back most U.S. mortgages. On the other hand, loans that don’t meet these guidelines are considered non-conforming loans. Jumbo loans are the most common type of non-conforming loan.
Generally, lenders require you to pay private mortgage insurance on many conventional loans when you put down less than 20 percent of the home’s purchase price.
Pros Of Conventional Mortgages
- Can be used for a primary home, second home or investment property.
- Overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher.
- You can ask your lender to cancel PMI once you’ve gained 20 percent equity.
- You can pay as little as 3 percent down for loans backed by Fannie Mae or Freddie Mac.
- Minimum FICO score of 620 or higher is required.
Who Should Get One?
Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.
02 Government Insured Mortgages (FHA and VA)
The U.S. government isn’t a mortgage lender, but it does play a role in helping more Americans become homeowners. Three government agencies back loans: the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans) and the U.S. Department of Veterans Affairs (VA loans).
FHA LoansBacked by the FHA, these loans help make homeownership possible for borrowers who don’t have a large down payment saved up and don’t have pristine credit. Borrowers need a minimum FICO score of 560 to get FHA’s maximum 3.5 percent financing. FHA loans require two mortgage insurance premiums: one is paid upfront, and the other is paid for a pre-determined period of years dependent on your equity position at the inception of the loan. This can increase the overall cost of your mortgage.
VA Loans
VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. VA loans do not require a down payment or PMI, and closing costs are generally capped and may be paid by the seller. A funding fee is charged on VA loans as a percentage of the loan amount to help offset the program’s cost to taxpayers. This fee, as well as other closing costs, can be rolled into the loan as well.
Pros of Government Insured Loans
- They help you finance a home when you don’t qualify for a conventional loan.
- Credit requirements are more relaxed.
- You don’t need a large down payment.
- They’re open to repeat and first-time buyers.
Who Should Get One?
Government-insured loans are ideal if you have low cash savings, less-than-stellar credit and can’t qualify for a conventional loan. VA loans tend to offer the best terms and most flexibility compared to other loan types for military borrowers.
03 Non-QM/Alternative Income Documentation Mortgages
Non-QM, or non-qualified mortgages offer alternative methods of substantiating or documenting income for borrowers who cannot provide traditional or common documents to prove income, such as W2 forms or tax returns reflecting positive income. These types of mortgages are typically utilized by self-employed borrowers, and are heavily dependent on compensating factors such as credit and equity.
Pros of Non-QM Mortgages
- They help you finance a home when you don’t qualify for a conventional loan.
- Alternative forms of income documentation accepted- i.e., bank statements.
- They’re open to repeat and first-time buyers.
- They normally allow cash out to pre-determined LTV's (loan-to-value).
Who Should Get One?
Non-QM mortgage are a viable option for self-employed borrowers who cannot provide traditional income documentation, but want to refinance or purchase at near-market rates.
04 Jumbo Mortgages
Jumbo mortgages are conventional loans that have non-conforming loan limits. This means the home prices exceed federal loan limits. For 2020, the maximum conforming loan limit for single-family homes in most of the U.S. is $510,400, according to the Federal Housing Finance Agency. However, "Super Conforming" limits allow up to $726.525 in designated counties. Jumbo loans are more common in higher-cost areas and generally require more in-depth documentation to qualify.
Pros of Jumbo Mortgages
- You can borrow more money to buy a home in an expensive area.
- Interest rates tend to be competitive with other conventional loans.
Who Should Get One?
Jumbo loans make sense for more affluent buyers purchasing a high-end home. Jumbo borrowers should have good to excellent credit, high incomes and a substantial down payment. Many reputable lenders offer jumbo loans at competitive rates.