We have access to all mortgage products available in the marketplace through our various lender channels.  Mortgage products can be divided into categories in two different ways. Conventional and government loans. Secondly, all the various mortgage programs may be classified as fixed rate loans or adjustable rate loans and then conforming or non-conforming.

Conventional Loan Types

Fixed Rate Mortgage
The traditional fixed rate mortgage is the most common type of loan program.  With a fixed rate mortgage, you know exactly what your principal and interest payment will be each month for the life of your loan.  Terms extend from 10 to 40 years and can be paid off at anytime without penalty.  This loan is suggested for borrowers that plan on remaining in their homes for longer than 7 years or those who have a low tolerance for risk.

Adjustable Rate Mortgage (ARM)
Adjustable Rate Mortgages (ARMs) are loans whose interest rate can vary during the loan term.  These loans usually have a fixed interest rate for an initial period of time and can then adjust based on current market conditions.  The rate adjustment is based on a popular economic indicator such as the 1-Year Treasury Security, London Interbank Offered Rate (LIBOR), or the Cost of Funds Index (COFI).  The monthly payments are typically amortized over 30 years, but the rate can be fixed for anywhere from 1 month to 10 years.  These loans are for borrowers who are more "risk tolerant" or for those who know they will only be in the home for a short period of time, as is the case if the homeowner considers the property to be a "starter" home.  It is also very popular with investors.

Stated Income Mortgage
When a borrower is self-employed, or those that simply cannot document enough income, there are several types of "stated income" loans available.  With this type of loan, you fill out a mortgage application just as you would under any other program, but simply state your employment and income.  Your ability to afford the mortgage is based on the income stated on your application.  (The income must be consistent with that expected for the stated occupation.) Your employment will be verified, but no documentation or verification of income is required.  A Stated Income loan requires a downpayment or equity and higher credit scores than loans with documented income.

No Documentation Mortgage
This type of loan is intended for the self-employed, and will usually imply a higher than normal interest rate.  No income or employment verification is required since the loan is based on the down payment, the credit history of the borrower and the assessed property value.  Due to the lack of any documentation these loans have higher interest rates and credit standards than any other loan types.

Construction Loans
A construction loan is used when the borrower is either planning to build a new home using a general contractor, or is taking out the mortgage for a builder to sell them new construction at a set price.  Either way, the loan application is treated as a regular loan. They are usually variable rate loans that have interest only payments during the construction phase.  Draws are scheduled based on the stages of construction to pay the builders.  For convenience, many construction loans are construction-to-permanent, which means that when the construction is complete, the loan is converted into a normal mortgage.  This has the advantage of a single loan with one closing.

Conforming Loans

Conventional loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors. By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing that results in the availability of mortgage credit for Americans.

Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Fannie Mae and Freddie Mac announce new loan limits every year.

The 2009 High Balance conforming loan limits for first mortgages were  increased to the following amounts in the King County area:

Jumbo Loans

Loans above the maximum conforming loan amount established by Fannie Mae and Freddie Mac are known as 'jumbo' loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the spread between the two varies with the economy.

Government Loans

Any mortgage loan other than an FHA, VA or an RHS loan is conventional one.

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory loan limit.

VA loans

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms and rates, usually without a down payment or mortgage insurance. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $417,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

RHS Loan Programs

The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no downpayment.

Ginnie Mae which is part of HUD guarantees securities backed by pools of mortgage loans insured by these three federal agencies - FHA, or VA, or RHS. Securities are sold through financial institutions that trade government securities.

State and Local Housing Programs

Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. Also, there are often loan assistance programs offered at the local or state level such as MCC (Mortgage Credit Certificate) which allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market.

B/C "Subprime" Loans

Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called 'B', 'C' and 'D' paper loans vs. 'A' paper conforming loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports. Their purpose is to offer temporary financing to these applicants until they can qualify for conforming "A" financing. The interest rates and programs vary, based upon many factors of the borrower's financial situation and credit history. These "subprime" loans have become much more difficult to find in the current mortgage market and those available have high interest rates.