Loan Programs

Wondering how to get started in the loan process? Below is a list of files and documents you should start collecting in order to get ready for your loan. We’ve also compiled a list of steps to take once you’re ready.

At any point if you have any questions or concerns, reach out to your mortgage banker or call 877-793-9362

Conventional Mortgage

A conventional loan is financing that is not insured or guaranteed by the federal government. A conventional loan adheres to guidelines set by Fannie Mae and Freddie Mac. The following are ways that conventional loans differ from government loans:

  • Require minimum 3 percent down payment
  • Interest rate varies based on credit score and loan term
  • Mortgage insurance premiums vary based on down payment amounts

Conventional loans also give borrowers the option of having a fixed or adjustable rate mortgage, as well as choosing a loan term.

FHA Mortgage

FHA loans finance single-family purchases of new or existing homes. It’s a popular option for first-time homebuyers because of the low 3.5 percent down payment requirement, which can be gifted. Because FHA loans do not require a 20 percent down payment, borrowers must pay an upfront mortgage insurance premium, which can be structured into the loan, and an annual premium that is paid monthly.

VA Mortgage

A VA mortgage is a type of loan administered by the Department of Veterans Affairs and is available only to veterans of the U.S. Armed Forces. It allows a veteran to purchase a home with no money down and without having to pay points to the lender. Like FHA loans, there is a maximum limit to the amount that a veteran can borrow.

USDA Mortgage

The USDA strives to assist homebuyers purchase homes in eligible rural areas through their Guaranteed Rural Development Loan (RD). An RD loan allows for 100 percent financing on top of low mortgage insurance premiums. Income limits and property eligibility apply.

For more information on mortgages, check out our Mortgage 101 Handbook!

Download: Mortgage 101 Handbook

Loan Types

Fixed-Rate Mortgage

A Fixed Rate Mortgage charges the same percentage rate of interest over the entire term of the loan (usually 10, 15, 20, or 30 years). Home owners repay the loan with a fixed, monthly installment of principal and interest.

Adjustable-Rate Mortgage (ARM)

An Adjustable Rate Mortgage have interest rates that flucuate and are tied to one-year Treasury bills or a specific financial index. The intial interest rate is usually low, and then the rate bumps up between one and two points per year. There usually is a yearly cap or ceiling of two points, and the loan also has lifetime ceiling cap of a specified amount, for example six points.

Balloon Mortgage

This type of mortgage can vary in length and types. For example, taking out a balloon mortgage can mean that you make monthly payments of both principal and interest or just monthly payments of interest only for a specified length of time. In both instance, when the loan comes due after that specified length of time, you must pay the entire balance of the original loan amount. They can be paid in one of two ways. The first way is the mortgage can be amortized over fifteen or thirty years and the home buyer pays the first five or ten years of the loan before paying off or refinancing the balance. The second payment method is to pay only the interest on the loan until the end of the loan period at which time they are responsible for the original amount of the loan.

Reverse Mortgage

A reverse mortgage enables homeowners, age 62 and over, to convert part of the equity in their home into cash. This loan was conceived to help retirees with limited income cover basic monthly living expenses, though there is no restriction for how proceeds can be used. A reverse mortgage gets its name, because the transaction is reversed – instead of the borrowers making monthly payments to the lender, the lender makes payments to the borrower.

Heloc Mortgage

A HELOC stands for home equity line of credit. It is a loan in which the lender agrees to provide a maximum amount within an agreed period. Unlike a regular loan, borrowers do not receive the entire sum upfront but are allotted a line of credit to borrow sums up to the agreed credit limit. The collateral of the money borrowed is the borrower’s equity in his/her home. This is a popular option for homeowners needing funds for major items, such as higher education expenses, home improvements, medical bills, etc.

State Specific Programs

Illinois Housing Development Authority (IHDA)

The Illinois Housing Development Authority (IHDA) was created to finance quality affordable housing across Illinois. The IHDA offers the following programs to help homebuyers achieve affordable homes:

  • Welcome Home Heroes – offers $10,000 cash assistance for down payment, a 30-year fixed rate mortgage, and a federal tax credit that reduces federal income tax liability to eligible veterans and active military personnel.
  • SmartMove – provides $6,000 cash assistance for down payment for first-time homebuyers.
  • SmartMove Plus – is for buyers who currently own and want to refinance or buy a new home. SmartMove Plus offers a 30-year fixed rate mortgage with a competitive interest rate.
  • SmartMove Trio – allows first-time homebuyers up to $6,000 cash assistance for down payment, federal tax credit that reduces income tax liability, 30-year fixed rate mortgage and a variety of loan option to choose from.

Iowa Finance Authority (IFA)

The Iowa Finance Authority (IFA) offers a variety of programs that address housing needs. IFA offers affordable mortgage and entry cost assistance programs for first-time homebuyers and previous homeowners, in partnership with participating lenders, like Compass Mortgage:

  • FirstHome – offers first-time homebuyers state-sponsored, affordable, fixed-rate mortgages.
  • FirstHome Plus – provides up to $2,500 to eligible borrowers to help with down payment and closing costs. Must be used in conjunction with the FirstHome program.
  • Homes for Iowans – assists both repeat and first-time homebuyers by providing state-sponsored, affordable, fixed-rate mortgages.
  • Homes for Iowans Plus – provides up to $2,500 in cash assistance to eligible borrowers to cover entry costs, such as down payment and closings costs. Must be used in conjunction with the Homes for Iowans program.
  • Military Homeownership Assistance – provides eligible service members and veterans a $5,000 grant to be used towards down payment and/or closing costs.
  • Take Credit Mortgage Credit Certificate Program – allows homebuyers to claim 30% of their mortgage interest, up to $2,000, as a federal income tax credit each year for the life of the mortgage (up to 30 years).

Home Improvement Loan Programs

FHA 203k

The FHA 203K loan is one of the most popular home improvement loans. It’s not a home equity loan or second mortgage and it can be used on just about any owner-occupied, primary home. An FHA 203(k) loan allows borrowers to get just one mortgage loan to finance both the ownership of the property and its rehabilitation.

There are two types of FHA 203(k) loans: regular and streamline, both of which can be used for purchase or refinance.

Home Style Renovation

The Fannie Mae HomeStyle® Renovation mortgage enables a borrower to obtain a purchase or rate/term mortgage and receive funds to cover the cost of repairs, remodeling or renovations to the property. HomeStyle® is a great option for homebuyers purchasing a fixer-upper or homeowners who need to finance repairs, renovations, improvements or energy efficient improvements. This loan allows homeowners to do so without a need for a second mortgage, home equity line of credit (HELOC) or home equity loan.

For more information on home improvement loans, check out our guide to rehab loans!

Download: Rehab and Construction Guide