Richard's Real Estate Thoughts - Chattanooga TN Mortgage Lender: Mortgage Options for home purchase: conventional, Jumbo, FHA, VA, USDA

Mortgage Options for home purchase: conventional, Jumbo, FHA, VA, USDA

Home buyers can become confused with the different mortgage loan options. Most often buyers find that there is one best option for their circumstances and meeting with an experienced mortgage loan officer early in the process can help clarify the best mortgage type. This should be done before submitting a purchase offer.

Basically there are three types of mortgage loans: conventional, government, and Jumbo.

Jumbo mortgages are for mortgages that exceed conventional loan limits. In Chattanooga, Cleveland, and North Georgia, the conventional limit for a single family residence is $417,000. Jumbo loans have many guidelines similar to conventional mortgages, however, they are not regulated by FNMA or FreddieMac. The biggest difference with Jumbo loans is that low down payment programs are not generally available. The typical down payment is 10% or greater. If you are considering a Jumbo loan it is important to shop program details such as loan amount, down payment required, reserves required, credit score requirements, and DTI requirements. Lender and programs can have many different guidelines which must be considered up front in the loan process.

For many buyers a second mortgage can be used to move the first mortgage to conventional limits. This would help home buyers avoid the sometimes higher rates of Jumbo loans and mortgage insurance.

Conventional mortgages are for loans that are regulated by federal government sponsored agencies, FNMA or FreddieMac. The loan limit in the Chattanooga area is $417,000. Guidelines between the two agencies are similar with respect to credit, to income and debt to income, and funds sources for closing, although there are some differences that can help specific circumstances for an individual buyer. Conventional mortgages offer some low down ( 3 to 5%) payment loan options. For home buyers with good credit scores conventional loans are often the best alternative. Mortgage insurance when required can be cancelled when the loan to value is low enough.

Government mortgages are generally directed toward specific home buyers and for primary residence homes only.

FHA mortgages are more generally targeted. They are for moderate income families. The loan limit for single family homes in Chattanooga and Cleveland area is $271,050. This limit fits many families. The minimum investment for an FHA mortgage is 3.5%. This loan has mortgage insurance.

Selecting between FHA and conventional mortgages often comes to a decision based on credit. FHA generally is more tolerant of lower scores as far as rate and mortgage insurance adjustments.

USDA Rural Development mortgages are for moderate income families buying a single family home in a designated rural area. There are no loan limits however there are income limits. Two basic eligibility checks are whether the property is in a designated area and if the household income is below the USDA income limits. This is an excellent program, with no down payment and a relatively low monthly mortgage insurance premium.

VA mortgage is a loan for veterans, which requires no down payment. VA mortgages are often the best loan for eligible borrowers. VA loans do not have monthly mortgage insurance. There are no income limits. The loan limit is the same as conventional limits. Veterans can use their VA eligibility to purchase a home above the VA limits. They would be required to pay a down payment for the amount above the VA loan limit. If you are interested in a higher VA loan, please call to discuss the expected down payment.

An important early step for a VA loan is to obtain the VA eligibility. If a veteran does not have full entitlement remaining, a VA loan can still be possible in some cases. Please call with any questions about your eligibility or your remaining entitlement.

Making the correct choice about which mortgage type is best is generally not difficult. An early preapproval is important in making this selection and in making your home purchase a smooth process.

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Richard Smith
NMLS# 184479 TN# 104002 GA# 28928 

Conventional, FHA, FHA 203k, HUD $100 down purchases, VA,

Rural Development ( USDA), and Jumbo Loans

Lending in Chattanooga, Tennessee and Georgia for over 20 years.

Sierra Pacific Mortgage

Cell phone: 423-280-0345 Email:

Visit my website to inquiry about a home loan.

Read my most recent articles in Scotsman Guide.

This blog represents the opinions of Richard Smith. The posts and comments written on the blog do not represent the opinions or positions of Sierra Pacific Mortgage. 

Comment balloon 0 commentsRichard Smith • October 11 2016 02:04PM