A Conforming loan is a mortgage that meets lending rules set by Fannie Mae and Freddie Mac and is within loan limits set by the Federal Housing Finance Agency (FHFA). Conforming loans come in 15-year and 30-year terms with fixed interest rates.
Conforming loans are the most common type of mortgage. If you have a credit score above 620 and a loan amount less than $970,800 (this is the maximum conforming loan amount for 2022 in Hawaii), there’s a good chance this is the type of home loan you’ll use. It is still the most common loan borrowers use in Hawaii.
Basic requirements to qualify for a conforming loan:
- A credit score of 620 or higher
- Debt-to-income ratio (DTI) below 45% in most cases
- Down payment of 3% or more
- Stable record of employment and income going back at least two years
Jumbo / Non-Conforming Mortgages
A Jumbo or Non-Conforming loan is a loan that does not fit the parameters of Fannie Mae or Freddie Mac and thus cannot be sold to the FHFA entities. A Jumbo is a mortgage with a loan amount of over $970,800 (in 2022). Other reasons a loan may be Non-Conforming could be that you do not meet the Conforming qualifications such as income, credit score, or the type of property you are trying to acquire.
The following do not qualify for a conforming loan:
Jumbo and Non-Conforming Loans can be more expensive than Conforming loans, so it’s even more critical to have Mana Mortgage on your side to find the best lender for your needs.
An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. FHA home loans require lower minimum credit scores and down payments than conventional loans, making them especially popular with first-time homebuyers.
FHA Loan Terms
FHA loans come in 15-year and 30-year terms with fixed interest rates. The agency’s flexible underwriting standards are designed to help give borrowers who might not qualify for private mortgages a chance to become homeowners.
But there’s a catch: Borrowers must pay FHA mortgage insurance, which protects the lender from a loss if the borrower defaults. Mortgage insurance is required on most loans when borrowers put down less than 20 percent.
FHA loans require two mortgage insurance premiums:
- Upfront mortgage insurance premium: 1.75 percent of the loan amount, paid when the borrower gets the loan. The premium can be rolled into the financed loan amount.
- Annual mortgage insurance premium: 0.45 percent to 1.05 percent, depending on the loan term (15 years vs. 30 years), the loan amount, and the initial loan-to-value ratio, or LTV. This premium amount is divided by 12 and paid monthly.
In most cases, FHA loans can be far more expensive in the long run than conventional mortgages, so you want to have Mana Mortgage on your side to help you find the best mortgage.
VA loans are for current and veteran service members and eligible spouses. VA mortgages have competitive interest rates and usually require no down payment. For those who qualify, a VA loan is typically one of the best, if not the best, option.
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs and issued by a private lender, such as a bank, credit union, or mortgage company. A VA loan can make it easier to buy a home because it typically doesn’t require a down payment.
Advantages of VA mortgages
- Low-Interest rates
- No Down-Payment
- Low credit score requirements.
On the downside, a premium must be paid upfront, called a funding fee (disabled Veterans are exempt), and you cannot buy vacation homes or investment property.
We proudly serve Veterans and work hard to find the best VA loans for our current and former service members.
USDA loans, also known as Rural Development loans, help make owning a home more affordable for those living in eligible rural and suburban areas and with household incomes within the USDA limits.
Advantages of a USDA Loan
- No down-payment required.
- A 30-year fixed mortgage
- A 640 minimum credit score.
Eligibility is more restricting than an FHA loan, but they tend to be cheaper than FHA. The location of the home and the home itself must be within the parameters set by the USDA. Like FHA or VA loans, they can only be used to buy primary residences.
Hawaii does have USDA-approved zones, mainly on the Big Island but not exclusively. Ask us if your situation might qualify you for a USDA loan.
Non-QM / Hard Money / Bridge Loans
A Non-QM loan, or Non-Qualified Mortgage Loan, is a type of mortgage where the method used to calculate your income differs from conventional mortgages. That includes Bank Statement loans, where the payment is calculated based on the monthly deposits into a personal/business account, Assets Income loans, where your assets are used to calculate an income stream, or pure Stated-Income loans, where you can state your income and provide a business Profit & Loss statement as the only document required to verify your income. Because these loans are riskier for the lender, the pricing is typically higher than for conventional mortgages. They are pretty flexible and an excellent product for those who might have tax-sheltered income or income not otherwise recognized by the requirements of traditional mortgages.
At the far end of that spectrum are Hard-Money Loans and Bridge Loans. Individuals and companies typically issue these to the borrower and not by a bank. They provide the most flexibility and are typically only used for a short time to purchase an Investment Property, often for a buyer to purchase, renovate, and resell the property. Hard Money Loans can be done very quickly, sometimes within a week or so. They carry a high-interest rate and the payment of up-front points and typically have a term of 2 years or less, so you must have a plan for replacement financing or selling the property fairly quickly.
Planning with the best experts in the business at Mana Mortgage is essential. We have access to the best Non-QM lenders in the industry and stand ready to get you access to them all.
If the perfect home can’t be bought but must be built for you, a Construction Loan might be the tool you need to make the house of your dream. A Construction Loan works in stages where the initial phase or draw can be the purchase of land. Then you have additional draws for permits and contractor labor and material cost during construction, all the way until you get your certificate of occupancy. Typically the loan is disbursed along the way, with the lender checking on progress before delivering funds. For that reason, bonded contractors must be used. The loan interests only until it reaches its total amount and a certificate of occupancy is obtained. Typically, it becomes long-term financing, such as a 30-year fixed loan at an interest rate negotiated before the loan first originates.
Depending on the type of loan used, a down payment might be required (other than VA or USDA construction loans). You can rely on the experts at Mana Mortgage to guide you end to end on getting a construction loan.
A land loan is a loan issued to cover the purchase of land exclusively. You might need a land loan if you want to purchase land for investment and don’t have plans yet to build on it or plan on subdividing and reselling, for example. Land Loans are typically interest only and have a short-term span, typically two years.
We have access to local and mainland lenders that will issue land loans in Hawaii.
Home Equity Lines of Credit / HELOC
A home equity line of credit, or HELOC, is a home equity loan that allows you to draw funds as needed and repay the money at a variable interest rate. Typically interest only for the first ten years – the draw period – followed by a repayment period of 10 to 15 years.
Typical uses for a HELOC
- Debt consolidation
- Home improvement
- Purchase of another hard-to- collateralized asset (such as Condotel, Land, or Non-Warrantable Condo).
HELOCs can be secured by your primary or secondary home but typically not by an investment property.
HELOC Qualification Process
The qualification process for credit and income is similar to conventional loans. In a lot of cases, an appraisal is not required.
We have partnered with the best local lenders to offer the most convenient and competitive HELOCs. Discuss with the experts at Mana Mortgage the prospect of a HELOC to fulfill your borrowing needs.