Seattle Area Real Estate | Current Loan Products

The financing and mortgage industry is in a constant state of change and evolution particularly these days as we get further away from the difficulties experienced several years ago.  There are new loan products with different guidelines being introduced fairly often.  That's why it's important to work with a mortgage broker, like Northwest Equity Solutions, who has access to a broad spectrum of options through an extensive network of wholesale lending channels.  Here is a list of the loan products that we currently have access to:

CONVENTIONAL LOANS

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 5 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 1Year 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.

CONFORMING LOANS

Conventional loans may be conforming and nonconforming.  Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two GSE (Government Sponsored Enterprise) 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, 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.  Currently the maximum standard conforming loan limit in Washington is $647,200.

The 2022 High Balance conforming loan limits for mortgages were increased to the following amounts in the Seattle area (King, Pierce & Snohomish County):

• One Unit: $891,250
• Two Unit: $1,140,950
• Three Unit: $1,379,150
• Four Unit: $1,713,950

 

JUMBO LOANS

Loans above the maximum conforming loan amounts noted above which are 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 higher interest rates than conforming loans and require larger down payment percentages.  The Jumbo market for loans continues to expand, we now have access to more products with low down payment percentages including 5% or 10% down payment Jumbo loans.

 

GOVERNMENT LOANS

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.

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 loan limits for the county of the property.

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 $424,100 although in the Seattle area High Balance Jumbo loans are available. 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 residents in “rural areas” with minimal closing costs and no down payment.  These “rural areas” are not necessarily far from cities and can be surprisingly close to suburban areas.  The RHS loan program does have income restrictions in that the borrower must not exceed an income limit for the county based upon the number of members in the family.  

 

STATE & 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.

 

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.

 

SECOND MORTGAGES

Second mortgages come in two primary forms – Home Equity Loan or Home Equity Line of Credit.  Home Equity Loans are fixed rate loans that do not change their payment over the life of the loan and typically require payment of principal and interest.  Home Equity Lines of Credit are typically tied to the prime rate and their interest rates will fluctuate with it.   Home Equity Lines often only require payment of interest on a monthly basis and not necessarily principal.   Both 2nd mortgage products will often allow the borrower to access additional funds up to a maximum CLTV (Combined Loan To Value) with the first mortgage set at a maximum percentage of the value of the property.  

 

STATED INCOME LOANS

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 significant down payment or equity and higher credit scores than loans with documented income and is a portfolio loan product only offered by a small number of lending sources.

 

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 the few available have high interest rates.  Like Stated Income loans, subprime loans are portfolio loan products only offered by a small number of lenders.