Understanding Different Types of Loans We Offer

Debt Service Coverage Ratio (DSCR) loans are a type of real estate financing primarily based on the cash flow generated by the property, rather than the personal income of the borrower.

Pros:

• Focus on Investment Potential: By emphasizing the property's income, DSCR loans allow investors to leverage their real estate portfolio for further growth.
• Easier Approval Process: With less emphasis on personal income, these loans provide an alternative for investors who may not meet traditional income verification standards.
• Scalability: Ideal for expanding real estate portfolios, DSCR loans support multiple property investments, enabling continuous growth.
• Flexible Terms: Offers various term options, including interest-only periods, to help investors manage their cash flow more effectively.
• Competitive Rates: Designed to cater to investors, DSCR loans come with competitive interest rates tailored to the rental income of the property.

Cons:

• Stricter Property Cash Flow Requirements: The property must generate sufficient income to cover the loan payments, which may limit eligibility for some properties.
• Limited Personal Income Consideration: Borrowers relying on personal income for qualification may find these loans less advantageous.

• Property Cash Flow: The property must generate sufficient income to cover the loan payments, typically assessed through the Debt Service Coverage Ratio (DSCR). A DSCR of 1.25 or higher is often required.
• Property Type: Suitable for residential, multi-family, and commercial properties that can generate rental income.
• Down Payment: Higher down payments may be required, often around 20-25% of the property's value.
• Credit Score: While personal credit score is less emphasized, a good credit score (typically 620 or higher) can still be beneficial for securing favorable loan terms.
• Property Condition: The property should be in good condition and capable of generating consistent rental income.

A 30 Year Fixed Mortgage is a type of home loan where the interest rate remains the same for the entire 30-year term. This type of mortgage is one of the most popular choices among homebuyers due to its predictability and long-term stability.

Pros:

• Predictable monthly payments
• Long-term stability
• Easier to qualify for compared to shorter-term loans

Cons:

• Higher interest rate compared to shorter-term loans
• More interest paid over the life of the loan

• Good credit score (typically 620 or higher)
• Stable income
• Debt-to-income ratio under 43%

A 15 Year Fixed Mortgage is a home loan with a fixed interest rate for the entire 15-year term. This option is beneficial for borrowers who want to pay off their mortgage faster and save on interest costs.

Pros:

• Lower interest rates compared to 30-year fixed mortgages
• Less interest paid over the life of the loan
• Faster path to homeownership

Cons:

• Higher monthly payments
• Stricter qualification requirements

• Excellent credit score (typically 700 or higher)
• Stable and higher income
• Debt-to-income ratio under 36%

An Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that changes periodically based on market conditions. The initial interest rate is usually lower than that of a fixed-rate mortgage.

Pros:

• Lower initial interest rates
• Lower initial monthly payments
• Potential for lower costs if rates remain stable or decrease

Cons:

• Uncertainty and risk of rising interest rates
• Potential for significantly higher monthly payments in the future

• Good to excellent credit score
• Ability to handle potential payment increases
• Understanding of interest rate fluctuations

FHA Loans are mortgages insured by the Federal Housing Administration (FHA). They are designed for low-to-moderate-income borrowers who may have lower credit scores and smaller down payments.

Pros:

• Lower credit score requirements
• Lower down payment options (as low as 3.5%)
• Flexible qualification guidelines

Cons:

• Mandatory mortgage insurance premiums (MIP)
• Loan limits vary by region
• Potentially higher overall loan costs

• Minimum credit score of 580 (for 3.5% down payment)
• Steady employment history
• Debt-to-income ratio under 43%

VA Loans are mortgages guaranteed by the U.S. Department of Veterans Affairs (VA). They are available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves.

Pros:

• No down payment required
• No private mortgage insurance (PMI) required
• Competitive interest rates

Cons:

• Only available to eligible veterans and service members
• Funding fee required (can be financed into the loan)
• Property must meet VA standards

• Certificate of Eligibility (COE)
• Satisfactory credit score
• Sufficient income to cover loan payments

Jumbo Loans are mortgages that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). They are used to finance luxury homes and properties in high-cost areas.

Pros:

• Ability to finance higher-priced properties
• Flexible terms and options

Cons:

• Stricter qualification requirements
• Higher interest rates
• Larger down payment required

• Excellent credit score (typically 700 or higher)
• Significant income and assets
• Debt-to-income ratio under 36%

203K Loans are a type of FHA loan that allows borrowers to finance both the purchase and renovation of a home with a single loan. This loan is ideal for properties that need significant repairs or upgrades.

Pros:

• Financing for purchase and renovation in one loan
• Low down payment options
• Can be used for a wide range of repairs and improvements

Cons:

• More paperwork and complexity
• Strict guidelines on eligible repairs
• Higher interest rates compared to standard FHA loans

• Minimum credit score of 580
• Detailed renovation plan and cost estimates
• Property must meet FHA standards

USDA Loans are mortgages backed by the U.S. Department of Agriculture for rural and suburban homebuyers. These loans offer low interest rates and no down payment options.

Pros:

• No down payment required
• Low interest rates
• Flexible credit guidelines

Cons:

• Property must be in an eligible rural area
• Income limits apply
• Mortgage insurance required

• Minimum credit score of 640
• Stable income and employment
• Property must be in a USDA-eligible area

HARP (Home Affordable Refinance Program) Loans were designed to help homeowners refinance their mortgages even if they owe more than the home's current value. This program was available to those with Fannie Mae or Freddie Mac loans.

Pros:

• Ability to refinance underwater mortgages
• Lower interest rates
• No appraisal required in some cases

Cons:

• Program ended in 2018 (current refinances need other programs)
• Limited to Fannie Mae and Freddie Mac loans
• Specific eligibility criteria

• Loan must be owned by Fannie Mae or Freddie Mac
• Loan originated before May 31, 2009
• Current loan-to-value (LTV) ratio greater than 80%

A Reverse Mortgage is a type of loan available to homeowners aged 62 and older that allows them to convert part of the equity in their homes into cash. The loan is repaid when the borrower sells the home, moves out, or passes away.

Pros:

• Provides supplemental income for retirees
• No monthly mortgage payments
• Borrower retains home ownership

Cons:

• Loan balance increases over time
• Fees and interest can be high
• Reduces the amount of equity passed to heirs

• Homeowner must be 62 years or older
• Home must be the primary residence
• Must have significant equity in the home