Loan Options

Conventional Loan

These loans have fewer restrictions than government-guaranteed loans. Conventional loans offer more flexible terms and program benefits. These loans can have down payments as low as 3%.

30 Year Fixed Rate Mortgage
Offers steady monthly payments over a 30 year term, more affordable payments as compared to mortgages with shorter terms.

15 Year Fixed Rate Mortgage
This will allow you to payoff your home loan in less time and reduce your interest payments over the life of the loan.

Adjustable Rate Mortgage
This is a loan with an interest rate that changes. There is an initial period where the rate is fixed, after which, the interest rate adjusts according to the market and loan terms.
Jumbo Loan
This type of loan exceeds the loan limit set by Freddie Mac and Fannie Mae.
Most counties within California have a 2020 conforming loan limit of $510,400, for a single family home.  Higher priced areas like Los Angeles have a conventional loan limit up to $765,600.
FHA Loan

Federal Housing Administration (FHA) loans are some of the easiest types of mortgage loans to qualify for because they require a low down payment and the borrower can have less-than-perfect credit. Approximately 40% of all home loans in the US are FHA loans.

2019 FHA Loan Requirements:
  • 580 or above FICO score requirement with at least a 3.5% down-payment, or
  • 500 to 579 FICO score requirement and 10% down-payment
  • Mortgage insurance (MIP) usually around 0.85 percent of the loan amount annually
  • Two years of employment history
  • Must occupy the home as primary residence
FHA 203k Loan: The FHA 203k is a renovation loan program that provides funds for both the purchase and renovation of a home. There are two types of an FHA 203K loans. The first is normal 203k, which is given for properties that need structural repairs such as a new roof or a room addition. The second is the streamlined FHA 203k, which is given for non-structural repairs such as painting and new appliances.

VA Loan
Veterans Affairs (VA) Loans are available to eligible veterans. It can be obtained without a down payment and does not require private mortgage insurance (but does require payment of a guarantee fee).

US Department of Agriculture (USDA) loans require no down payment and credit qualification is more flexible than other loan types. According to the USDA, if an area’s population is no more than 35,000, it is “rural,” even if you might think of it as “suburban.” That means there are many areas in California where you may qualify for this type of loan and be able to reap the benefits.

Home Equity Line Of Credit (HELOC)
Homeowners can borrow on the equity in their home with a home equity line of credit (HELOC), which works similar to a credit card (but is secured by a second trust deed on your property). HELOCs have a set amount of money that can be drawn by the homeowner when needed. These loans are typically set up as an open line of credit for the first 10 years. After that, the balance is amortized over the remaining term of the loan, typically 20 years). HELOCs can be used as a "piggyback" loan during purchase to attain a higher loan-to-value (less down payment), or as a stand-alone loan to access equity on your existing home.

Reverse Mortgage
Reverse mortgages are increasing in popularity with seniors who have equity in their homes and want to supplement their income. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA-approved lender. If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may participate in FHA's HECM program. The HECM is FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity. The amount that will be available for withdrawal varies by borrower and depends on:
  • Age of the youngest borrower or eligible non-borrowing spouse;
  • Current interest rate; and
  • Lesser of appraised value or the HECM FHA mortgage limit or the sales price.
  • If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
  • You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

Fix & Flip Financing
Fix & flip loans are financing solutions that have been designed to help facilitate the fix & flip process and reduce the time, inconvenience, and fees associated with applying for and paying off a loan.
Unlike prime loans, these types of loans are secured by collateral. In this case, the real estate you will be fixing and flipping will serve as the collateral for your loan. With a fix & flip loan, you can purchase foreclosed, distressed, wholesale, and discounted properties in the area.

There are numerous different names for a fix and flip loan but the purpose of the loan remains the same. Allowing a real estate investor to borrow funds for a short-term in order to purchase a property, make repairs and improvements and then sell the property quickly for a profit.

When applying for fix and flip financing, the lender may consider the following about the borrower:
  • Experience in real estate and experience in fix and flip projects
  • Purchase price of the subject investment property
  • Amount of cash reserves available for holding costs and rehab costs
  • Estimated after repair value of the property
  • Estimated cost of the renovation

Accessory Dwelling Unit (ADU) Loan Options

2nd Loan Against Property

For many property owners, it makes sense to keep their existing first mortgage in place and request a second loan for ADU financing. The property owner must have sufficient equity in the property so the proposed combined loan to value will remain at an acceptable level (90% max). 

New 1st Loan Against Property

While maintaining an existing first mortgage is often preferred, in some cases it may be more beneficial to consolidate your loans into a combined first mortgage in order to decrease your overall interest rate.

Borrow Against Another Property

In some situations it may be better to secure an ADU loan against another piece of real estate instead of the property where the accessory dwelling unit will be built.

Benjamin Pruett
Principal Broker Owner, NMLS #670105
Fortitude Real Estate Loans, NMLS #1910649
California Department of Real Estate, Real Estate Broker #01241704

Based in the Los Angeles area, serving all of California

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(858) 336-4618

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