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What is a Traditional Loan?

A traditional loan is a mortgage provided by banks, credit unions, and other financial institutions to help you purchase a home. It typically requires a down payment (often around 20%) and is repaid in monthly installments over a set term, such as 15, 20, or 30 years. Traditional loans offer either fixed interest rates, where your monthly payments stay the same, or adjustable rates, where the rate may change after an initial period. Your home serves as collateral for the loan, meaning the lender can take possession if you fail to make payments. To qualify, you'll need a solid credit score, stable income, and a manageable debt-to-income ratio. Traditional loans are a reliable, long-term option for those seeking predictable payments and financial stability in their home purchase.

Purchase

Homeownership offers a wide range of benefits that extend beyond just financial rewards. In addition to the financial advantages, owning a home also provides emotional, social, and societal benefits. Discover everything homeownership has to offer, and remember, we can help make your dream home a reality with financing options that require as little as 3% down.

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Let’s debunk some common myths about buying a home:

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  • Many Americans still believe that a 20% down payment is necessary to purchase a home – but that’s a misconception.

  • In fact, over the past five years, more than 70% of first-time, non-cash homebuyers made down payments of less than 20%.

  • For 60% of first-time buyers, the typical down payment is 6% or less.

  • Surprisingly, only 13% of young adults (aged 34 and under) know that they can buy a home with a down payment as low as 5% or less.

Refinance

Refinancing a mortgage involves replacing an existing mortgage loan with a new one. The principal balance of the current loan is paid in full using the new loan's funds. Once the refinance is complete, the old loan is retired and replaced with a new mortgage loan that has different terms. Homeowners refinance for various reasons, with the most common being to lower mortgage rates or monthly payments.

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Common Reasons to Refinance:

  • Lower Interest Rate: A lower rate reduces mortgage payments, freeing up funds for other purposes.

  • Shorter Loan Term: Opting for a shorter term means paying off the loan faster, saving money on interest, and building equity quicker.

  • Switching Rate Types: Moving from an adjustable-rate mortgage (ARM) to a fixed-rate loan ensures stable payments, aiding long-term budget planning.

  • Accessing Home Equity: Through cash-out refinancing, homeowners can use their home equity for various purposes like paying off debt or funding home improvements.

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Steps to Consider Before Refinancing:

  1. Define your goal: Identify what you aim to achieve, such as lowering monthly payments or accessing cash.

  2. Explore your options: Evaluate different refinance types and benefits.

  3. Understand the costs: Refinancing involves closing costs, typically 2-5% of the loan amount.

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Cash-Out Refinance Overview:

Cash-out refinancing allows homeowners to convert home equity into cash for various uses. A homeowner can typically borrow up to 80% of their home’s equity, subject to loan type, property occupancy, and other factors.

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Uses for Cash-Out Refinance:

  • Pay off high-interest debts.

  • Fund home improvement projects.

  • Address personal or financial needs.

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Qualifications:

  • Sufficient equity in the home.

  • A credit score of at least 640.

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Pros and Cons:

  • Pros: Lower interest payments, improved credit profile, potential tax benefits.

  • Cons: Closing costs, risk of foreclosure if debt habits worsen, and increased mortgage payments.

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Alternatives to Cash-Out Refinance:

  • Personal Loans: No reliance on home equity but shorter terms and higher payments.

  • HELOC/Second Mortgage: Access home equity with a separate payment, leaving the primary mortgage unchanged.

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Is Refinancing Right for You?

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Determining if refinancing is the right decision depends on factors like home value, interest rates, and your current mortgage.

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When to Consider Refinancing:

  1. Increased Home Value: A rise in local housing market conditions increases home equity, enabling better loan terms or access to cash.

  2. Low Interest Rates: Refinancing for an interest rate at least 0.5% lower than your current rate can lead to significant savings. A 1% or more reduction is highly advantageous.

  3. Early Mortgage Term: Refinancing early redirects payments from interest to principal, accelerating equity growth.

Benefits of Refinancing:

  • Financial Savings: Lower monthly payments, reduced interest, and potential shorter loan terms.

  • Equity Conversion: Use home equity for personal needs without tax penalties.

  • Payment Stability: Fixed-rate loans provide predictable payments, ensuring financial security.

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Understanding Cash-Out Refinancing:

  • How It Works: A cash-out refinance replaces your existing mortgage with a higher-balance loan. The difference is provided as cash to the homeowner.

  • Costs: Closing costs average 2-5% of the loan amount. Higher loan-to-value ratios often lead to higher interest rates.

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Risks and Considerations:

  • Higher monthly payments due to increased loan amounts.

  • Potential to fall into debt cycles if funds are mismanaged.

  • Foreclosure risks if payments are unaffordable.

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Alternatives to Refinancing:

  1. Personal Loans: Avoid home equity use with loans featuring higher interest rates and shorter repayment terms.

  2. HELOC/Second Mortgage: Maintain your existing mortgage while accessing additional funds.

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Making the Decision:

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Refinancing can be a powerful financial tool when aligned with your goals and financial situation. Assess your needs, consider market conditions, and consult with a trusted advisor to ensure refinancing aligns with your long-term objectives.

Conventional Loans

A Conventional loan is a loan that is not backed by a federal agency but instead backed by private lenders such as Fannie Mae or Freddie Mac. Typically, conventional loans may require more from the borrower than an FHA loan. Conventional loans are widely popular due to their flexibility and variety of options available for different financial situations. Borrowers often choose conventional loans for their competitive interest rates and lack of mandatory upfront mortgage insurance premiums, provided a 20% down payment is made.

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Conventional loans also offer benefits like the ability to avoid private mortgage insurance (PMI) if the borrower has sufficient equity, typically over 20%. With fewer restrictions compared to government-backed loans, conventional loans can be an excellent choice for homebuyers with stable income and strong credit scores.

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What are the requirements for a Conventional Loan?

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  • Primary residence or investment

  • 3% Down (first-time homebuyer only)

  • Minimum 620 credit score

  • No mortgage insurance if more than 20% down

  • Down payment can be a gift

  • Seller allowed to contribute towards closing costs

What types of conventional loans are there?

Conforming Loans

  • A conforming loan adheres to the loan limits set by Fannie and Freddie.

    • Conventional (Conforming):

      • $647,200 in most counties

      • Most common loan type

      • Loan amount must be $647,200 or less in most counties and may be as high as $970,800 in high-cost counties.

      • If your down payment is less than 20%, you’ll typically need mortgage insurance.

      • Credit score of 620

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Non-Conforming Loans

  • A non-conforming loan is a loan that falls outside of the conforming loan limits.

    • Jumbo (Non-Conforming):

      • Up to $1-2 million

      • Credit score of 640+

      • Jumbo loan for amounts greater than the Conforming Jumbo limit in your county, up to $1-2 million.

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Who is eligible for a conventional loan?

Anyone who meets the necessary criteria for a conventional loan.

What is an FHA Loan?

An FHA Loan is a mortgage insured by the Federal Housing Administration. These loans allow borrowers to finance homes with down payments as low as 3.5%, making them especially popular with first-time homebuyers.

Who Can Qualify for an FHA Loan?
FHA Loans are ideal for first-time homebuyers. They require a smaller deposit than conventional loans, making homeownership more accessible and keeping initial costs low.

What are the Requirements?

  • FICO® score of at least 580 to qualify for a 3.5% down payment.

  • Mortgage Insurance Premium (MIP) is required.

  • Debt-to-Income Ratio must be less than 43%.

  • The home must be the borrower’s primary residence.

  • Borrower must have steady income and proof of employment.

VA Loan

VA loans are designed specifically for veterans. They must be issued by a VA-approved lender and are guaranteed by the federal government.

The primary benefit of a VA loan is that veterans with qualifying credit and income can purchase a home with no money down, making it an attractive option for military service members.

VA loans also feature flexible requirements, no private mortgage insurance (PMI), and competitive mortgage rates.

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Who Can Get a VA Loan?
To qualify for a VA Loan:

  • A veteran must have served 181 days during peacetime, 90 days during wartime, or 6 years in the Reserves or National Guard.

  • Spouses of service members who were killed in the line of duty may also qualify.

What Types of Loans Are Available for Veterans?

  • Purchase VA Loan: Used to buy a home.

  • VA IRRRL (Interest Rate Reduction Refinance Loan): Refinances the current mortgage to a lower interest rate.

  • VA Cash Out Loan: Allows veterans to access equity from their home.

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The VA Streamline Refinance Loan (VA IRRRL):
This loan allows veterans to refinance their mortgage interest rate to a lower rate with minimal out-of-pocket expenses.

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Requirements to Qualify for a VA IRRRL:

  • Be current on your VA mortgage with no more than one 30-day late payment in the past year.

  • The new monthly payment must be lower than the previous payment unless refinancing an ARM to a fixed-rate mortgage.

  • No cash can be received from the IRRRL.

  • You must certify that you currently or previously occupied the property.

  • The property must have previously used your VA Loan eligibility.

 

Why Choose Geneva Financial?
VA loans should only be handled by licensed and experienced mortgage professionals. Geneva Financial ensures its loan professionals are thoroughly trained on all VA loan products to provide the best service possible.

Jumbo Loan

What is a Jumbo Loan?
A jumbo loan is a mortgage for homes where the loan amount exceeds conforming loan limits. In most counties, the conforming loan limit is $548,250, but this limit may be higher in certain areas.

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Who Is a Jumbo Loan Designed For?
A jumbo 30-year fixed-rate mortgage is ideal for financing high-priced or luxury homes without requiring a second mortgage or tying up cash. Jumbo loans are suitable for buyers with:

  • A lower debt-to-income ratio

  • A higher credit score

  • A larger down payment

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What Are the Benefits of a Jumbo Loan?

  • Loan amounts up to $1-2 million or more

  • Credit scores as low as 640

  • Designed for amounts exceeding the conforming loan limit in your county

  • A variety of tailored products to finance luxury homes

Our Jumbo Loan Products

Trailblazer Jumbo

  • Loan amounts up to $3,000,000

  • Maximum 90% Loan-to-Value (LTV)

  • Cash-out up to 80% LTV

  • Condos up to 85% LTV

  • Debt-to-Income (DTI) up to 43%

  • Credit score down to 660

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Trailblazer Plus Jumbo

  • Loan amounts up to $3,500,000

  • Maximum 90% LTV

  • DTI up to 50%

  • Credit score down to 660

  • Low reserves based on AUS and loan amount

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Champion Classic & Achiever Expanded Credit

  • Loan amounts up to $3,000,000

  • Credit scores as low as 620

  • Bank statements or full documentation for income qualification

  • 30-year fixed with a 10-year interest-only option

  • First-time homebuyers allowed

  • Non-warrantable condos permitted

  • LTV up to 90% (Champion only)

  • No mortgage insurance required

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VA Jumbo Loan
For veterans purchasing homes above the conforming loan limit ($548,250 or up to $822,375 in high-cost areas):

  • Less strict qualifying requirements

  • No down payment required based on credit score

  • Designed to leverage veteran benefits for larger loan amounts

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