South Carolina Jumbo Loans
Home loans fall into two categories based on their loan amount: conforming and jumbo loans. If you need a home loan that’s over the conforming limit, you will probably need to get a Jumbo mortgage.
Jumbo loans offer the same flexibility as conforming loans, however the only difference is that they are not eligible for purchase by Fannie Mae or Freddie Mac and must be sold in the secondary market. This means that the rates for Jumbo loans will be slightly higher than home loans with similar terms that are conforming loans. Sometimes you may hear Jumbo loans referred to as non-conforming loans.
Who Should Get A Jumbo Mortgage?
If you are able to afford a more expensive home, but haven’t saved up enough money to bring the loan down to conforming limits, a jumbo loan is a great option for you.
If you’re looking to find your “forever” home, and know that as time goes on your income will increase, a Jumbo loan could be an affordable home loan option for you. This may be a good way to bypass the “starter home” and prevent you and your family from moving at a later date to a bigger home.
Perhaps you’ve found the perfect home, but it just happens to be in a neighborhood where all the homes are highly priced. A jumbo loan may be the only option you have in order to buy a home, due to the high-value real estate in the area.
Things You Should Know About a Jumbo Loan
A jumbo mortgage is a great way to rapidly build your credit. By making your payments on time, you’ll quickly see your credit score improve.
Due to the large amount of a jumbo loan, it may be more expensive to refinance a jumbo mortgage, mainly because of higher closing costs.
Refinancing: What is It and What you need to know?
Refinancing is the process of renegotiating your mortgage. With refinancing, you may change your loan terms or take out equity in your home.
Why refinance? You may want to take advantage of favorable market rates to cash in on savings. Or perhaps you need extra cash for home remodeling or education. Whatever your reason, working with Palmetto First Mortgage can help make the process easy.
Reasons to Refinance and Why Timing is Important
Many factors may come into play when you are making a decision to refinance your mortgage. For example, you may want to refinance your home to pay for your child’s education. In this case, your need to refinance is immediate. However, you may also want to refinance for reasons such as remodeling your home. In this case, your timing can be more flexible and the choice to refinance can be based on market conditions. Whatever your reason, Palmetto First Mortgage can help you understand how market forces such as interest rate fluctuations will impact your decision and how the decision to refinance is often as much about “when” as “why”.
A conventional loan is a mortgage that is not insured or guaranteed by the federal government. A conventional loan adheres to the guidelines and maximum loan amount set by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are government sponsored-enterprises which were created by the federal government to buy and sell conventional mortgages.
A conventional loan can have a fixed rate or adjustable rate. The most common type of conventional loan is a 30-year fixed rate mortgage, which means the interest rate is fixed and will not change for the entire 30 year term of the loan.
A conventional loan usually requires at least a 5% down payment, but can be as much as 20% down payment depending on factors such as your credit score, the type of property and occupancy. If your down payment is less than 20% you will be required to obtain private mortgage insurance (PMI).
A mortgage that has a fixed interest rate for the entire term of the loan. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.
So what is an adjustable-rate mortgage?
A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
The loan may be offered at the lender’s standard variable rate/base rate. There may be a direct and legally defined link to the underlying index, but where the lender offers no specific link to the underlying market or index the rate can be changed at the lender’s discretion. The term “variable-rate mortgage” is most common outside the United States, whilst in the United States, “adjustable-rate mortgage” is most common, and implies a mortgage regulated by the Federal government, with caps on charges. In many countries, adjustable rate mortgages are the norm, and in such places, may simply be referred to as mortgages.
Among the most common indices are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). A few lenders use their own cost of funds as an index, rather than using other indices. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate (alternatively, the term of the loan may change). This is distinct from the graduated payment mortgage, which offers changing payment amounts but a fixed interest rate. Other forms of mortgage loan include the interest-only mortgage, the fixed-rate mortgage, the negative amortization mortgage, and the balloon payment mortgage.
Adjustable rates transfer part of the interest rate risk from the lender to the borrower. They can be used where unpredictable interest rates make fixed rate loans difficult to obtain. The borrower benefits if the interest rate falls but loses if the interest rate increases. The borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages.
What is an FHA Loan?
An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.The FHA program was created in response to the rash of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans accessible and affordable. Nowadays, FHA loans are very popular, especially with first-time home buyers.
What Are the Advantages of FHA Loans?
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required. Borrowers who cannot afford a traditional down payment of 20 percent or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
FHA Loan Requirements
- Must have a steady employment history or worked for the same employer for the past two years
- Must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage in your state
- Must make a minimum down payment of 3.5 percent. The money can be gifted by a family member.
- New FHA loans are only available for primary residence occupancy
- Must have a property appraisal from a FHA-approved appraiser
- Your front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, home insurance) needs to be less than 31 percent of your gross income, typically. You may be able to get approved with as high a percentage as 46.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Your back-end ratio (mortgage plus all your monthly debt, i.e., credit card payment, car payment, student loans, etc.) needs to be less than 43 percent of your gross income, typically. You may be able to get approved with as high a percentage as 56.99 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Minimum credit score of 580 for maximum financing with a minimum down payment of 3.5 percent.
- Minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. FHA-qualified lenders will use a case-by-case basis to determine an applicants’ credit worthiness.
- Typically you must be two years out of bankruptcy and have re-established good credit. Exceptions can be made if you are out of bankruptcy for more than one year if there were extenuating circumstances beyond your control that caused the bankruptcy and you’ve managed your money in a responsible manner. See this page for more details.
- Typically you must be three year out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
Property needs to meet certain standards
Also, an FHA loan requires that a property meet certain minimum standards at appraisal. If the home you are purchasing does not meet these standards and a seller will not agree to the required repairs, your only option is to pay for the required repairs at closing (to be held in escrow until the repairs are complete).
Keep current on the premium costs for FHA loans by visiting the U.S. Department of Housing and Urban Development (HUD).
FHA Loan Limits
There are maximum mortgage limits for FHA loans that vary by state and county. In certain counties, you may be able to get financing for a loan size up to $729,750 with a 3.5 percent down payment. Conventional financing for loans that can be bought by Fannie Mae or Freddie Mac are currently at $625,000.
To find out the FHA mortgage limits in your area, click here.
What Is a VA Loan?
South Carolina VA Loans are home loans for the purchase of a primary residence available to consumers who have served or are presently serving in the U.S. military. While the Department of Veterans Affairs (VA) does not lend money for VA loans, it backs loans made by private lenders (banks, savings and loans, or mortgage companies) to veterans who qualify. Palmetto First Mortgage can help you with a South Carolina VA Loan today!
Who Is Eligible for a VA Loan?
- Active-duty personnel
- Reservists/National Guard members
- Some surviving spouses
What Are the Benefits of a VA Loan?
There are many, as taken directly from the Veterans Affairs site:
- No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property).
- Buyer informed of reasonable value.
- Negotiable interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation).
- Closing costs are comparable with other financing types (and may be lower).
- No mortgage insurance premiums.
- An assumable mortgage.
- Right to prepay without penalty.
- For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
- VA assistance to veteran borrowers in default due to temporary financial difficulty.
How Can Veterans Get VA Loans?
Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program, but will need a Certificate of Eligibility from the VA to prove to the lender they are eligible for a VA loan. Lenders can also get the certificate on behalf of their clients.
How to Apply for a Certificate of Eligibility and What Evidence You’ll Need to Get the Certificate
Click here for eligibility requirements.
How Big of a South Carolina VA Loan Can a Veteran Get?
2014 VA County Loan Limits : According to the VA there is “… no maximum that an eligible veteran may borrow using a VA-guaranteed loan.” However, there are county limits that must be used to calculate the VA’s maximum guaranty amount for a particular county. Generally, an eligible veteran can get a loan up to $417,000 with no money down and in some high-cost places, up to $1,094,000.
General info about VA loans, click here.
General FAQ page for VA loans, click here.
What Are The Benefits Of A USDA Home Loan?
South Carolina USDA loans are structured just like conventional ones via Fannie Mae and Freddie Mac. Where they differ, though, is with respect to down payment requirements and mortgage insurance.
Unlike conventional loans or FHA Loans, USDA South Carolina loans have no down payment requirement, which allows a home buyer to finance a home for 100 percent of its purchase price. The U.S. Department of Agriculture will assess a two percent mortgage insurance fee to all loans, and the cost may to be added to the loan size at the time of closing, as can the costs of eligible home repairs and improvements.
You can’t do that with a Fannie Mae or Freddie Mac loan.
Another “RD Loan” advantage is that its annual mortgage insurance fee is just 0.40% annually, no matter how large or small of a down payment.
This is less than half of the private mortgage insurance charged via a comparable conventional loan, and up to one-fourth of what the FHA will charge (except for participants in the FHA HAWK program for reduced MIP).
Furthermore, because USDA home loans do not have a specific loan size limitation, home buyers can theoretically borrow more money with a USDA mortgage than via conventional, VA or FHA routes.
Loans insured by the U.S. Department of Agriculture are available as 30-year fixed rate mortgages only, and come with their own USDA Streamline Refinance program.
How Do I Qualify For A USDA Home Loan in South Carolina?
Similar to FHA home loans, rural housing loans aren’t made by the USDA. Rather, the USDA insures mortgage lenders making USDA Section 502 loans against loss. The program is meant to spur home ownership in rural and underdeveloped areas.
In order to qualify for a USDA loan, home buyers must meet two requirements.
First, the buyer must buy a home in a USDA-eligible area. In general, USDA property eligibility is governed by census tract density. However, the term “rural” leaves room for interpretation, opening Section 502 mortgages to buyers in unexpected parts of the country.
For example, huge swaths of California are USDA Rural Loan-eligible, as is most of the Midwest. Even New Jersey is stuffed with USDA-eligible homes.
A buyer’s second USDA eligibility requirement is that household income may not exceed 115% of the area’s median income. A mortgage lender can tell you whether your income meets program requirements, if you’re unsure how to check.
There are other USDA qualifying criteria, too, including :
- The subject property must be a primary residence
- The buyer must be at least two years seasoned from a bankruptcy discharge
- The buyer must have decent credit
- The buyer must meet a qualifying ratio of 29 percent for housing costs; and 41 percent for total debt
- The buyer may not own another home within commuting distance of the subject property
However, it’s important to note that these guidelines are not steadfast — specifically, with respect to credit scoring and debt-to-income ratios. There is no minimum credit score requirement with the USDA mortgage program, nor is there a minimum tradeline requirement. Buyers are evaluating on the overall strength of their loan application.
This is also why the 29/41 debt ratios can be waived. A buyer which can show a strong credit score, for example, or deep reserves can generally get approved with debt ratios in excess of the recommended limits.
For How Much Can I Get Approved With USDA Loan?
For today’s home buyers, current mortgage rates are low and they’re especially low with the USDA program. The USDA loan is designed for low rates and leniency so long as the buyers meets the USDA’s property and income eligibility requirements.
Note, however, that the USDA changes its “rural areas” fairly regularly and an expanding town is apt to lose its rural loan eligibility with the next census tract update. Homes which are USDA-eligible today may not be USDA-eligible next year.
Get help with your rural home loan and determine your personal eligibility. See for how much of a mortgage you can be USDA-approved.