How to select your mortgage loan

August 19, 2014

Every day we hear about the variety of products offered by mortgage banks, such as FHA, Conventional and Veterans loans, among others. The truth is that all of these products have their own specifications and advantages. Yet what’s important is to evaluate your needs at a given moment in order to determine which one is more convenient for you. To do this, it is useful to know the basic characteristics of the major types of loans.

FHA (Federal Housing Administration) loans offer great benefits for purchasing and refinancing. They have no income limitations and grant eligibility to individuals without  a credit record. These mortgage loans are assumable and never impose prepayment penalties. They allow you to purchase a property with a minimum down payment of 3.5% or to refinance, without cash-out, up to 97.75% of the value of the property. If you need cash-out, this loan allows you to refinance up to 85% of the value of the property.  One of the most attractive benefits of FHA loans is that, if unable to make your monthly mortgage payment due to  financial hardship caused by loss of employment, accident, disability or any other valid reason, it offers you options through Loss Mitigation Programs. Qualification is subject to evidence provided by your tax returns for the last 2 years and only properties to be used as first homes are eligible for this type of loan.

On the other hand, conventional loans offer greater flexibility in relation to the use of  the housing unit being purchased. This product applies to properties to be used as first or second home and as an investment. There are two types of conventional loans: Conforming and Non-Conforming.

Conforming loans are guaranteed by private investors which allows them to offer lower interest rates. Qualification is based on your tax returns and financing is limited to a maximum of $417,000.  However, Non-Conforming loans offer the flexibility of financing beyond $417,000. Loan qualification may be based on financial statements.

Veterans loans grant financing to eligible individuals, members of the US military service and veterans. Both in purchasing and refinancing, you may obtain up to 100% financing. These loans are exclusively for first homes and qualification is based on your tax returns

Personal Loans with Collateral, as well as second mortgages, are good for individuals with a low interest rate on their mortgage and need additional money without having to refinance their first mortgage.

Based on this information, it should be easy for you to determine the type of mortgage loan that best suits your needs.  Nevertheless, it is important to consult an expert on your particular case in order to obtain personalized information. Please contact a Popular Mortgage expert at (787) 707-7070 or go to our website at