Mortgage Loan Types

LAKESHORE FINANCIAL INC offers a variety of loan programs to meet your needs. We work with the leading lenders in the industry to provide the best mortgage rates available in the market at a given time.

Most lenders would consider a conventional mortgage as a loan that conforms to the guidelines set forth by Freddie Mac and Fannie Mae, the two government sponsored enterprises (GSEs) that provide liquidity in the mortgage market. Technically speaking, a conventional loan is any mortgage that is not guaranteed or insured by the US government, such as VA, FHA and USDA. Conventional mortgages include portfolio loans, construction loans, and even subprime loans. But again, whenever a lender refers to a “conventional loan” they are most likely referring to conforming mortgages that are eligible for purchase by Fannie Mae and Freddie Mac.
Fannie and Freddie provide the liquidity needed by purchasing the mortgages, bundling them with thousands of other similar loans and selling them as bonds on the mortgage backed securities market. Fannie Mae and Freddie Mac use the criteria below to decide which mortgages they purchase?
1. They must meet the conforming loan limit which is evaluated every year
2. Loans with borrowers who have a minimum Credit Score
3. It meets the GSE guidelines in regards to Debt-to-Income ratios
4. Private Mortgage Insurance (PMI) is required for all loans where the borrower has less then 20% equity
5. Several more guidelines
It is important to understand that neither Freddie Mac nor Fannie Mae service the loans they purchase

A jumbo or a non-conforming loan is a home loan that exceeds the conforming loan amount limits of $424,100 in most of the United States and $636,150 in high cost areas like most of the San Francisco bay area counties. Jumbo loans generally follow the same underwriting principals but may require higher down payments, require higher FICO scores, tighter qualifying ratios and generally have slightly higher mortgage rates.

FHA loans are insured by the Federal Housing Administration to encourage and provide affordable housing opportunities with low down payment and flexible credit requirements.  Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. As is said in the lending industry, the more flexible a lender, the more expensive the loan. FHA loans are not for everyone because of the required mortgage insurance regardless of the down payment which is not required for loans with 20% or more down payment in conventional loans. For most applicants, conventional mortgages are less expensive than FHA home loans. However, those with fair-to-poor credit scores, low down payments and lower incomes may do better with FHA loans. The most popular FHA loan programs include: Section 203(b), Section 234(c), Section 203(k) and Home Equity Conversion Mortgages (HECM) or Reverse Mortgages. Just like Conventional Conforming loans, FHA loan amount limits vary across the country and from one county to the other.