Conventional loans are not backed by the federal government, and they come in two packages: conforming and non-conforming. For 2022, the conforming loan limits for Hawaii is $970,800 and $647,200 for most counties in California. Conforming loans meet the set standards placed by the Federal Housing Finance Agency (FHFA). Non-conforming loans do not meet FHFA standards. These loans are provided to those who have subpar credit, may have experienced bankruptcy and may be self-employed and do not have enough income reported to get a conventional type loan. Non-conforming loans may or may not require income verification and for self-employed borrowers, income may be verified by utilizing business bank statements.

Jumbo loans are loans that fall outside the conforming limits which is $970,800 for Hawaii and most counties within California have conforming loan limits of $647,200. Higher priced areas like San Francisco, Santa Clara, Santa Cruz, Orange, Marin and some other counties in California have conforming loan limits of $970,800.

FHA loans – These loans help make homeownership possible for borrowers without a large down payment or pristine credit. Borrowers need a minimum FICO score of 580 to get the FHA maximum of 96.5% financing with 3.5% down payment. Borrowers must pay FHA mortgage insurance, which is designed to protect the lender from loss if the borrower defaults. Mortgage insurance is required on most loans when borrowers put down less than 20%. All FHA loans require the borrower to pay two mortgage insurance premiums: 1) Upfront mortgage insurance premium is 1.75% of the base loan amount. The premium can be rolled into the financed loan amount. 2) Annual mortgage insurance premium ranges from 0.45 % to 1.05%, 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.

USDA loans help moderate to low income borrowers buy homes in rural areas. Homes are purchased in the USDA-eligible area and meet certain income limits to qualify. Some USDA loans do not require a down payment. There are extra fees that include a guarantee fee of 1 percent of the total loan amount that is typically financed with the loan and an annual premium of 0.35% of the total loan amount. Required debt to income ratio is usually 29/41.

VA loans provide flexible, low-interest mortgages for members of the US Military (active duty and veterans) and their families. VA loans do not require a down payment, mortgage insurance or a minimum credit score. VA loans charge a funding fee, a percentage of the loan amount, which can be paid upfront at closing or rolled into the cost of the loan along with other closing costs.

If you want to build a home, a construction loan can be a good choice. You can decide whether to get a separate construction loan for the project and then a separate mortgage to pay it off, or wrap the two together (known as a construction-to-permanent loan).

You do not have to rely on government-backed programs to find a mortgage that allows for a small down payment. Both Fannie and Freddie have their own low down payment options. There are certain stipulations to obtain these loans. Buyers must earn a maximum of 80% of the area median income (AMI). First-time home buyers must complete home ownership education. There is also a BorrowSmart option that provides assistance and is available on a first come, first serve basis. The borrower is eligible to receive the following grants based on their income: A $2500 grant applied when clients qualifying income is less than or equal to 50% of the area median income. Additionally, a $1250 grant is applied when the clients qualifying income is between 50.01% and 80% of the area median.

A reverse mortgage is a type of loan that allows senior homeowners ages 62 and older to borrow a portion of the home’s equity using the home as collateral. Unlike a regular mortgage in which the homeowner makes payments to the lender, with a reverse mortgage, the lender pays the homeowner. Reverse mortgages are typically paid when a person moves out of the home or dies. When you take out a reverse mortgage loan, title to the home remains with the homeowner. Upon death of the homeowner, the loan becomes due and payable. At that time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. 

With a HELOC, you are borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished. HELOC funds are borrowed during a “draw period”, typically 10 years. Once the 10-year draw period ends, any outstanding balance will be converted into a principal-plus-interest loan for a 20-year repayment period.