Know your
Loans
and secure your
Future
Knowing your loans is essential to making informed financial decisions and avoiding costly mistakes. Understanding different loan options allows you to choose the best financing for your needs and investment goals.
Securing your future starts with smart borrowing choices. The right loan can provide financial stability, helping you build wealth and achieve long-term success.
Loan Programs
WHAT IS AN FHA LOAN An FHA loan is a type of mortgage in the United States insured by the Federal Housing Administration (FHA), a government agency created in 1934. The FHA’s insurance helps protect lenders if borrowers can’t make their payments, making it easier for people to get approved for a mortgage. This is especially helpful for those who might not meet the stricter requirements of conventional loans.
How Do FHA Loans Work? FHA loans allow homebuyers to borrow a significant portion of a home’s value based on their credit score. If your credit score is 580 or higher, you can borrow up to 96.5% of the home’s value, which means you only need a 3.5% down payment. Those with credit scores between 500 and 579 might still qualify for an FHA loan, but you’ll need to make a 10% down payment. Keep in mind that many lenders set their credit score requirements, but Ernestine Crews requires a minimum score of 580 for FHA loans.
While FHA loans offer the advantage of lower down payments and more flexible credit requirements compared to other types of mortgages, they do come with a cost. You’ll need to pay a mortgage insurance premium, which is required as part of the loan.
Why FHA Loans Could Be the Perfect Fit for You
Low Down Payments: You must put 3.5% down with a credit score of 580 or higher.
Flexible Credit Requirements: Accessible to those with lower credit scores.
Competitive Interest Rates: Often lower than other loan options.
Assumable Loans: Easily transferable to a new buyer with favorable terms.
Limited Savings: Ideal if you haven’t saved enough for a down payment.
Credit Building: Great if you're working to improve your credit.
Primary Residence: FHA loans are for primary residences only.
First-Time Homebuyer: A smart choice for those entering the housing market.
FHA Loan Requirements Here are the FHA Loan requirements set by Ernestine Crews:
Credit Score: 580 or Higher: Qualify with a 3.5% down payment. 500 to 579: Qualify with a 10% down payment.
Down Payment: Minimum: 3.5% if your credit score is 580+ 10% if your credit score is between 500-579.
Employment History: Must have at least two years of steady employment & provide proof of income (pay stubs, W-2s, or tax returns).
Appraisal: The home must be appraised by an FHA-approved appraiser.
Primary Residence: FHA loans are only available for primary residences, not investment properties or second homes.
Move-In Requirement: You must move into the property within 60 days of closing.
Inspection: The home must meet minimum property standards.
FHA Loan Down Payments Your down payment is the portion of the home’s purchase price that you pay upfront. With an FHA loan, the minimum down payment you’ll need depends on your credit score, which ranges from 300 to 850 and reflects your creditworthiness.
If your credit score is 580 or higher, you must make a minimum down payment of 3.5%.
If your credit score is between 500 and 579, you can still qualify, but you’ll need to make a larger down payment of at least 10%.
For example, ECrews requires a minimum credit score of 580 for FHA loans.
FHA loans allow you to use gift assistance for your down payment, but it must be documented to confirm it’s a gift and not a loan that must be repaid.
FHA Loans & Credit Scores Your credit score is based on several factors, including:
The types of credit you hold (credit cards, loans, etc.).
Your credit utilization (how much available credit you’re using).
Your history of on-time bill payments.
The total amount you owe on your credit cards.
The amount of new or recent credit you’ve acquired.
FHA Interest Rate FHA interest rates can often be competitive with conventional mortgage rates. Since the loan is backed by the government, lenders may offer lower rates. The exact rate you get will depend on:
Current national mortgage rates.
Your income and credit score.
How much you plan to borrow.
Your down payment amount.
Your debt-to-income ratio.
WHAT IS A CONVENTIONAL LOAN
Conventional loans, often preferred by homebuyers and refinancers, offer flexibility and competitive rates. Unlike government-insured loans, these are issued by private lenders and adhere to guidelines set by Fannie Mae and Freddie Mac. These government-sponsored enterprises purchase mortgages from lenders and make them available to investors.
With Ernestine Crews, we recommend conventional loans to many of our clients due to their advantages, including the possibility of lower costs and fewer restrictions compared to government-backed options.
WHAT ARE THE DIFFERENT TYPES OF CONVENTIONAL LOANS?
Fixed-Rate Mortgages
Overview: Fixed-rate mortgages are ideal for buyers who plan to stay in their homes long-term. The interest rate remains the same throughout the life of the loan, making it easier to budget for the long term. This is best for buyers who want consistent payments and plan to stay in their homes for many years.
Adjustable-Rate Mortgages (ARMs)
ARMs offer lower initial interest rates than fixed-rate mortgages, but the rate can change over time based on market conditions. Typically, ARMs have an introductory period with a fixed rate (e.g., 5, 7, or 10 years) before adjusting annually.
This is best for buyers who:
Plan to sell or refinance before the adjustable period begins
Expect interest rates to drop in the future
HOW TO QUALIFY FOR A CONVENTIONAL LOAN
To qualify for a conventional loan, borrowers typically need:
Credit Score: A minimum credit score of 620, though higher scores are often required for better terms.
Down Payment: Conventional loans usually require a minimum down payment of 3%, though putting down 20% can help you avoid private mortgage insurance (PMI).
Debt-to-Income Ratio (DTI): Lenders generally prefer a DTI of 43% or lower, although some may allow up to 50%, depending on other factors.
CONFORMING VS. NON-CONFORMING LOANS
Most conventional loans are considered "conforming loans," meaning they adhere to the loan limits set by the Federal Housing Finance Agency (FHFA).
For 2024, the baseline conforming loan limit is $766,550, though this amount can be higher in areas with more expensive real estate markets, such as certain counties in California.
Loans that exceed these limits are known as “jumbo loans” or “non-conforming loans.” Jumbo loans are used for more expensive properties but have stricter qualifying requirements, such as higher credit scores and larger down payments.
WHY CHOOSE A CONVENTIONAL LOAN?
Conventional loans are a great option if you have a strong credit score, a stable income, and the ability to make a down payment of at least 3%.
They often offer more flexibility in terms and conditions compared to government-backed loans. For those who can put down 20%, conventional loans eliminate the need for PMI, which can save money over the life of the loan.
With Ernestine, we are committed to helping you navigate the mortgage process and find the best loan option for your needs.
Whether you are:
Buying your first home
Upgrading to a larger space
Refinancing your current mortgage
Our team is here to guide you every step of the way.
Conventional loans provide a reliable and versatile path to homeownership, especially for those with good credit and the ability to make a substantial down payment.
With various options, including fixed-rate and adjustable-rate mortgages, conventional loans can be tailored to fit your financial situation and home-buying goals.
Contact Ernestine Crews today for personalized advice and to explore your mortgage options. Let us help you secure financing that fits your needs and budget.
WHAT IS PRIVATE LOANS Private loans, often called private money loans, are a financing option primarily used by real estate investors who need quick access to capital or cannot qualify for traditional mortgage loans. These loans are typically funded by private investors or companies rather than traditional financial institutions like banks.
Private loans differ from conventional mortgages in that they are typically short-term loans, often lasting 1 to 3 years, and they usually come with higher interest rates due to the increased risk for the lender. Unlike traditional mortgages, which require a thorough vetting process, including credit checks and income verification, private loans are generally asset-based. This means the lender’s primary concern is the value of the property being used as collateral rather than the borrower’s creditworthiness.
WHAT CAN YOU BENEFIT WITH PRIVATE LOANS Private loans offer several advantages, especially for real estate investors who must act quickly. One of the most significant benefits is the speed of funding. While traditional loans may take weeks or months to close, private loans can often be funded in just a few days. This makes them an excellent option for investors looking to seize opportunities, such as purchasing properties at auction or flipping homes.
Another benefit is flexibility. Private lenders are not bound by the stringent guidelines that govern traditional mortgage lenders, so they can tailor the loan terms to fit the borrower’s needs. This might include flexible repayment schedules or customized loan structures.
WHAT ARE THE RISKS OF GETTING PRIVATE LOANS Private loans also come with their share of risks and considerations. The higher interest rates can significantly increase the cost of borrowing. Additionally, because these loans are short-term, borrowers must have a clear exit strategy to repay the loan when it comes due, such as selling the property or refinancing into a conventional mortgage.
Moreover, private lenders may charge additional fees, such as origination fees, that can add to the overall cost of the loan. It’s also important to note that if the borrower defaults, the lender can foreclose on the property much more quickly than a traditional mortgage, as private loans often include more aggressive default terms.
HERE ARE SOME DIFFERENT TYPES OF PRIVATE LOANS
Various types of private loans cater to different investment needs. Bridge loans are short-term loans used to “bridge” the gap between purchasing a new property and securing permanent financing or selling the property. Fix-and-flip loans are designed specifically for investors looking to buy, renovate, and sell properties for a profit. Rental loans provide longer-term financing for investors who plan to hold onto the property and rent it out.
Private loans are an excellent tool for investors who need quick, flexible financing options. However, due to their higher costs and risks, they require careful consideration. Ernestine Crews can guide you through the complexities of private lending, ensuring you make informed decisions that align with your investment goals.
WHAT IS A DSCR LOAN
This is for real estate investors who aim to purchase income-generating properties. Unlike traditional loans, DSCR loans don’t require borrowers to verify their income through tax returns or pay stubs. Instead, the lender evaluates the property’s cash flow to determine loan eligibility. This approach makes DSCR loans attractive to investors with complex financial situations or inconsistent income streams.
The key metric in DSCR loans is the debt service coverage ratio (DSCR), which measures how well a property’s net operating income covers its annual mortgage debt. A ratio above 1 indicates a property’s financial health and improves the chances of securing financing. For instance, a DSCR of 1.25 suggests a 25% surplus of income over mortgage payments.
DSCR loans are flexible in terms of the types of properties they can finance, including multi-family units, single-family rentals, commercial properties, and mixed-use properties. The key advantage of this loan type is that it allows investors to leverage the property’s income potential rather than relying on personal income, which can be advantageous for growing a real estate portfolio.
However, like any loan product, DSCR loans come with potential drawbacks. This loan, sharing similar risk profiles to conventional mortgages, typically carries a premium in interest rates. To further reduce risk, lenders often demand significant down payments, sometimes as high as 25% or more. Investors should also be aware that if the property’s cash flow declines, it could lead to financial difficulties, especially if the DSCR dips below the lender’s threshold.
For those interested in pursuing a DSCR loan, working with a lender experienced in this type of financing is important. Properly assessing the property’s cash flow, understanding the specific lender requirements, and having a clear plan for property management are all crucial steps in securing and successfully managing a DSCR loan.
This loan type can be a powerful tool for real estate investors looking to expand their portfolio, particularly in markets where properties are likely to generate steady rental income. However, the higher risk associated with these loans means they’re best suited for experienced investors who have a strong understanding of both the real estate market and property management.
Ernestine Crews can guide you through the process of securing a DSCR loan, ensuring you understand all the details and find the best financing solution to meet your investment goals.
WHAT IS A HARD MONEY LOAN?
Hard money loans are a type of financing typically used by real estate investors, house flippers, or those who need to secure a loan quickly but might not qualify for traditional loans. Unlike conventional mortgages, hard money loans are provided by private lenders or investors rather than banks or credit unions. These loans are secured by the property itself, meaning that if the borrower defaults, the lender has the right to take possession of the property.
Advantages of Using Hard Money Loans
One of the key advantages of hard money loans is the speed with which they can be obtained. Unlike traditional loans, which can take weeks or even months to process, hard money loans can be approved and funded in a matter of days. This makes them particularly attractive to investors who need to move quickly to secure a property.
Another benefit is the less stringent qualification process. Lenders focus more on the value of the property being used as collateral rather than the borrower’s creditworthiness. This makes hard money loans an option for those who may not qualify for conventional financing due to poor credit or lack of income documentation.
Factors to Weigh When Considering a Hard Money Loan
However, there are significant downsides to consider. Hard money loans usually come with higher interest rates, often ranging from 8% to 15%—much higher than the rates typically offered by conventional loans.
Additionally, hard money loans often require a larger down payment, with lenders usually financing only 70% to 80% of the property’s value. This means that borrowers need substantial cash reserves to qualify.
Another important consideration is the short-term nature of these loans. Most hard money loans have terms of 1 to 3 years, meaning borrowers need to have a clear exit strategy, such as selling the property or refinancing into a more traditional mortgage.
When Is the Perfect Time to Use a Hard Money Loan?
Hard money loans are best suited for short-term investments. They are ideal for real estate investors who need to secure a property quickly, such as those looking to flip a house. These loans can also be a good option for buyers who plan to renovate and resell a property or who need temporary financing until they can qualify for a conventional loan.
In summary, while hard money loans offer flexibility and speed, they come with higher costs and risks. Borrowers need to carefully assess their financial situation and exit strategy before committing to this type of financing.
Ernestine Crews can help you navigate the hard money loan process, ensuring you make informed decisions that align with your investment goals.
WHAT IS A VA LOAN?
VA loans, backed by the U.S. Department of Veterans Affairs, provide veterans, active military personnel, and their dependents with special opportunities to purchase homes. Ernestine Crews helps simplify the VA loan process, ensuring a smooth and efficient experience. These loans offer key benefits that make homeownership more accessible.
No Down Payment: VA loans eliminate the need for a down payment, allowing you to finance 100% of your home’s purchase price.
Low Interest Rates: They typically offer lower interest rates compared to conventional mortgage options.
No Private Mortgage Insurance (PMI): This removes additional costs, making homeownership more affordable.
Flexible Credit Requirements: VA loans often have more lenient credit standards than traditional mortgages.
BENEFITS OF VA LOANS WITH ERNESTINE CREWS
Working with Ernestine Crews ensures a seamless VA loan experience, including:
Easy Application: A straightforward process with guidance at every step.
Fast Processing: Efficient handling to help you secure approval quickly.
Clear Information: Transparent loan terms and costs from start to finish.
Expert Assistance: Professional guidance to help you understand and maximize your benefits.
HOW TO QUALIFY FOR A VA LOAN
To be eligible for a VA loan, you must:
Meet Service Requirements: Be a veteran, active-duty service member, or qualified surviving spouse.
Have a Qualified Credit Score: While no strict minimum exists, a higher credit score improves loan terms.
Show Stable Income: Demonstrate a reliable income source sufficient to cover mortgage payments.
Obtain a Certificate of Eligibility (COE): This confirms your qualification for a VA home loan.
STEPS TO APPLY FOR A VA LOAN
Pre-Qualification: Provide basic financial details to estimate your loan eligibility.
Submit Documents: Supply proof of income, employment, and military service. Ernestine Crews will guide you through this step.
Loan Review & Approval: Your application is processed, and approval is granted after review.
Closing: Finalize loan terms and close on your home with Ernestine Crews ensuring a smooth transaction.
With the right support, securing a VA loan can be a simple and rewarding experience. Let Ernestine Crews help you achieve homeownership with the benefits you deserve!
What our clients say
35 years
of experience
Discover how our clients have achieved their real estate goals and built wealth through our expert guidance and tailored investment strategies.
"Working with Ernestine Crews made my home-buying process stress-free! She guided me through every step of my VA loan, ensuring I understood all my options. I couldn’t have asked for a better experience!" – James W.
"Ernestine’s expertise in real estate financing helped me secure the perfect loan for my investment property. Her personalized approach and fast processing made all the difference!" – Maria L.
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