Types of Home Financing

by Jacqui Zuzgo 04/11/2021

Image by Credit Commerce from Pixabay

Finding financing for a home could be as simple as applying for a conforming FHA loan or it could be as difficult as having to locate a portfolio loan or even a combo loan. What you need depends on the real estate you are buying. Most people buying a primary residence get a conforming loan, whether it is conventional or government-backed.

Conforming vs. Non-Conforming

The first thing to determine is whether your loan is going to be conforming or not. A conforming loan for a single-family unit must be under $510,400 in most areas and $765,600 in other areas. The Federal Housing Finance Agency sets the rates. If you have to borrow more, you will need a jumbo loan or a piggyback loan. A common piggyback loan is where you pay 15 percent of the price, then take out two mortgages: one for 80 percent of the purchase price, then a second mortgage for 5 percent of the purchase price. You can work the percentages however you need them based on the purchase price. The piggyback loan keeps you from going into jumbo loan territory and possibly paying higher interest rates.

Conforming Loans

Conforming loans are conventional or government-backed loans. A conventional loan usually has a higher interest rate because it’s riskier to the lender. A government-backed loan, such as a VA or FHA loan is guaranteed by the federal government, thus it is less risky to lenders. Because of the lower risk, you get a better interest rate as long as your credit is good.

Adjustable vs. Fixed-Rate Loans

If interest rates are low and are projected to stay low, you can get an adjustable-rate loan to save a bit on the interest rate. As interest rates change, so does your mortgage payment. Adjustable rates are based on a certain index. For example, if your base interest rate is 4 percent, which means your interest rate will never go lower than that, and the Libor London rate is 1 percent, your rate is 5 percent. If the Libor London increases by a half percentage point, so will your loan. However, if it decreases by a point, your interest rate also lowers by a point.

Adjustable-rate loans are risky for the buyer because you don’t know if the rate will significantly increase over the life of the loan. If you plan on refinancing or selling the home after a few years, an adjustable-rate might be beneficial.

A fixed-rate loan means that your interest rate does not change over the life of the loan.

Portfolio Loans

You might have a hard time finding a loan because you are self-employed, your credit isn’t the best, or you are buying a property that doesn’t conform to most lenders’ standards. A lender doesn’t sell the loan on the secondary market, but instead holds it in the bank’s portfolio. These loans are riskier for the lender and will often have a higher interest rate.

About the Author
Author

Jacqui Zuzgo

I have been a REALTOR® in Massachusetts since 1984 and hold both a salesman and broker license. I am currently affiliated with Five College REALTORS® located at 190 University Drive, Amherst, MA. Over my career, I have consistently been a Top Producer in the Pioneer Valley and have gained a reputation for being a strong-minded, no-nonsense negotiator in the industry. I also frequently rank highly on Boston’s Top 20 for sales in Western Massachusetts. Some of my best qualities include my listening and communication skills. I have time and again proven to work well under pressure with exceptional attention to detail. My commitment to my clients and professionalism is obvious in every transaction.

Representing both buyers and sellers in Hampshire and Franklin Counties, as well as assisting in relocations throughout the United States and globally has helped me embrace the need for quality performance and develop an acute and sincere sensitivity to people's needs. Honing in on what matters most is almost a sixth sense. Communication and awareness of the situation at hand produce a final result that has undoubtedly led to the large referral business I maintain.

Education has been a theme throughout my 30 years of experience. Well versed in technology and holding key designations have proven to be assets to my performance and dedication to the Real Estate field. My never-ending enthusiasm, availability, knowledge and drive make for a seamless transaction every client, every time.

I am a native of the Pioneer Valley. I am committed to sharing all the area has to offer in making your transition, whether long distance or short, a satisfying experience.

Education:

  • University of Massachusetts, Amherst - Bachelor of Science 1983
  • Top Individual Seller for Residential Sales in the Pioneer Valley since 2006.
  • #1#1 Realtor in the entire Franklin/Hampshire Counties for Millions Sold since 1999.
  • Highest producer in sales since 2004 in Franklin/Hampshire Counties.
  • ABR®– Accredited Buyer's Representative
  • CRS – Certified Residential Specialist (only 3% of REALTORS® hold a CRS)
  • e-PRO – Digital Marketing, Certified e-PRO Realtor®
  • GRI – Graduate, Realtors® Institute
  • SRES– Seniors Real Estate Specialist®

Biographical Highlights:

Life long, active member of the community, born & raised in the Pioneer Valley. Graduate of University of Massachusetts, Amherst, BS 1983.

Current Committee Involvement:

Member of the local Chamber of Commerce - Post Board of Director's member Volunteer for the Road to Recovery.

Greenfield Community College Foundation Board Member 

Greenfield Savings Bank Corporator

MLS Professional Standards Committee Member

Have a question for Jacqui? Jacqui's email: [email protected]