Loan Application, Your Mortgage File

FHA, VA, Conventional . . .oh my!

There are many options when it comes to a mortgage. They can be confusing so I’m going to clarify them for you. Let’s start with an important concept. When a bank grants a loan there is a chance they will loose a great deal of money which is known as risk (if you want to know more about this, let me know and I’ll explain the losses incurred by foreclosures).  The majority of us are wary of taking risks. We insure our automobiles, health, life and more to avoid loosing thousands of dollars in case of an event. Banks do the same thing.

We choose large insurance companies like Progressive, American Family, etc — which are private companies– to do the job for us. Or, if your situation allows, there are government insurance programs available. New York 137

Banks insure loans in the same manner. They can employ a private company (MGIC, Radian and Genworth to name a few). Or, they can have the government do it (FHA, VA, and USDA).

Like your insurance company, there are rules that must be followed in order for these companies (or the government) to insure your mortgage. Some are stringent but offer better terms. Others are lenient but the terms more expensive.

The take away? FHA, VA and USDA  are all government programs that insure your mortgage if you can comply with the rules.  Conventional loans are typically privately insured or even uninsured (depending on your loan profile).

What determines which product you take? You should discuss your credit profile in length with your loan officer. He/she knows the benefit of each program and will be able to guide you into the right program. So remember, each type of program has different rules. Contrary to what you might think, it is not your lender just making things up as they go. I promise.


And for those interested, I took this tiger picture on my trip to NYC last spring.  Can anyone guess where it’s at?



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