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Types of Mortgages in St. Louis 

By Senior Mortgage Banker David True 

When you go to a doctor, they must diagnose the symptoms to figure out the problem. Then, the doctor must figure out the best way to cure the problem. Well, that process is similar to how a lender and YOU find the best loan option for your financial needs.

At First Integrity Mortgage Services, we ask questions to determine our clients’ goals for their mortgage needs and then recommend a solution. We also look at the larger financial picture of the borrower to understand all of their assets, liabilities, and income. There are many different types of loans and each offer their own unique benefits.

The basics of each different type of loan program available today are outlined below.

Types of Loans:

  1. Conventional Loan: A home loan that is not insured by the federal government. They are ideal for borrowers with strong credit, a stable income, and employment history.
    1. The borrower may choose from two different types of conventional loans.
    2. Conforming: This type of loan meets the loan amount limits that Fannie Mae and Freddie Mac set.
    3. Non-conforming: These loans do not meet the guidelines. Jumbo loans are the most common type.    
    4. The borrower can pay as little as 3% down for a conventional mortgage.
    5. There will be PMI (Private Mortgage Insurance) until there is sufficient equity in the property.
    6. Higher credit scores are generally necessary for this type of mortgage.
  2. Jumbo Loan:
    1. A loan amount in excess of $510,400(current 2020 loan limit)
    2. Down payments of at least 10 to 20% are typically required.
    3. Will need funds in savings account, investments or a combination of both for reserves.
  3. FHA Loan: This is a government program that helps make a home affordable for those who have weaker credit scores and do not have a large amount of funds for down payment.
    1. Requires 3.5% down payment.
    2. The program allows for credit scores for as low as 580.*
    3. This program requires an upfront mortgage insurance premium (1.75% of the loan amount) and ongoing monthly mortgage insurance.(0.85% of loan amount)
    4. Open to repeat and first time homebuyers as well as those who want to refinance.
  4. VA Loan: This type of loan is for members of the US military and their families.
    1. No down payment required
    2. No PMI(Private Mortgage Insurance)
    3. Closing costs are capped and could be paid by the seller.
    4. Funding fee is charged by the VA as a percentage of the loan amount, but can be rolled into the loan amount.
    5. Open to repeat and first time homebuyers as well as those who want to refinance.
  5. USDA Loan: Helps moderate to low income borrowers buy homes in rural areas.
    1. Home must be in a USDA eligible area.
    2. Borrowers must meet certain income limits to qualify.
    3. Some loans do not require a down payment for eligible borrowers.
    4. Open to repeat and first time homebuyers.
  6. Fixed Rate Mortgages: Keep the same rate over the life of the loan.
    1. Typical loan terms are 10, 15, 20 and 30 year repayment options.
    2. Monthly principal and interest payments stay the same for the life of the loan.
    3. Makes budgeting easier.
  7. ARM (Adjustable Rate Mortgage): A mortgage with an adjustable rate after initial lock period.
    1. If you are planning to purchase a home that you will only own for a few years, then the rate on an ARM could be more attractive and save you on interest.
    2. While the rate could adjust after its initial lock period, it is a good idea to understand how much the rate could change after the initial locked period.
    3. Payments could increase/decrease depending on the fluctuation of the rate after the initial lock period.

If you or someone you know is thinking about homeownership or refinancing at this time, have them reach out to First Integrity Mortgage Services in St. Louis, MO today.

For more information about the process or if you have any questions or comments regarding this article, please contact David True, NMLS# 604989, at (314)566-6200 or dtrue@firstintegrity.com.