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Book 2 of 10

🏠

Home Loans for DumDums

FHA, VA, Conventional, Jumbo — decoded in plain English.

👥 First-Time Home Buyers · 📖 8 Chapters · 🆓 Free

Chapter 1 of 8

Chapter 1

What Is a Mortgage?

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A mortgage is a home loan where the property is the collateral. The lender gives you money to buy the home, you live in it, and you repay over 15–30 years. Skip payments? The lender can foreclose and take the home.

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Down Payment

Your upfront contribution — typically 3% to 20% of the purchase price.

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Principal

The loan amount — what remains after your down payment.

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Interest

The lender's fee — expressed as an annual percentage rate.

🏡 PITI: Your total monthly mortgage payment usually includes Principal + Interest + Taxes + Insurance. Lenders wrap these into one payment.

🎯 Key Takeaway: Get pre-approved before shopping. It tells you your budget, strengthens your offers, and speeds up closing.

Chapter 2

FHA Loans

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FHA loans are government-backed mortgages designed to help people who might not qualify for conventional loans. Perfect for first-time buyers, those rebuilding credit, or anyone with a smaller down payment saved up.

✅ FHA Loan Requirements

580+ credit score → 3.5% down
500–579 credit score → 10% down
Primary residence only
Debt-to-income ratio under 43%
FHA-approved lender required

⚠️ MIP Warning: FHA loans require Mortgage Insurance Premium (MIP) — an upfront 1.75% fee plus annual 0.55%–1.05%. This stays for the life of the loan unless you put 10%+ down.

🎯 Key Takeaway: FHA is a gateway to homeownership when conventional financing is out of reach. Understand the MIP cost — it adds up over 30 years.

Chapter 3

VA Loans

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VA loans are a thank-you from the U.S. government to military service members, veterans, and surviving spouses. They offer unbeatable terms: zero down payment, no private mortgage insurance, and competitive rates.

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No Down Payment

Buy a home with $0 down. The full value can be financed.

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No PMI

No monthly mortgage insurance — saves hundreds per month.

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Better Rates

VA-backed = lower risk for lenders = lower rates for you.

Who Qualifies?

✅ Active-duty service members (90+ days)

✅ Veterans (honorable discharge)

✅ National Guard / Reserves (6+ years)

✅ Surviving spouses of veterans

🎯 Key Takeaway: If you qualify for a VA loan, use it. It's the most powerful mortgage benefit in America. The only required fee is a one-time VA funding fee (1.25–3.3%).

Chapter 4

Conventional Loans

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Conventional loans are not backed by the government — they follow rules set by Fannie Mae and Freddie Mac. They require stronger credit than FHA but offer more flexibility, no upfront mortgage insurance fee, and PMI that disappears once you have 20% equity.

Feature	Details
Min. Credit Score	620 (740+ for best rates)
Min. Down Payment	3% (first-time buyers) / 5% (others)
PMI	Required below 20% equity — cancels automatically at 22%
Loan Limit (2024)	$766,550 standard / $1,149,825 high-cost areas
Best For	Strong-credit buyers who want lowest long-term cost

🎯 Key Takeaway: If your credit score is 740+ and you can put 20% down, conventional is likely your best choice — lowest total cost over time.

Chapter 5

Jumbo Loans

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A jumbo loan is any mortgage that exceeds the conforming loan limit ($766,550 in most areas). Because they're too large for Fannie Mae/Freddie Mac to guarantee, lenders take on more risk — so requirements are stricter.

Jumbo Loan Requirements (typical):

Credit score 700+ (720+ preferred)
Down payment 10–20%+
DTI ratio under 43%
12+ months cash reserves in the bank
Full income documentation required

💡 Who needs a Jumbo? Buyers in high-cost markets like San Francisco, NYC, Miami, or Scottsdale where even "average" homes exceed $1M.

🎯 Key Takeaway: Jumbo loans are for expensive properties. You need excellent credit and strong reserves. Shop multiple lenders — rates vary significantly.

Chapter 6

HELOC & Home Equity Loans

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Once you've built equity in your home, you can borrow against it. Two options: a HELOC (revolving credit line like a credit card) or a Home Equity Loan (lump sum with fixed payments).

🔄 HELOC

Revolving credit line
Variable rate
Draw as needed
Interest-only during draw period
Best for ongoing expenses

💰 Home Equity Loan

Lump sum upfront
Fixed rate
One-time borrowing
Predictable monthly payments
Best for one big project

🎯 Key Takeaway: Both use your home as collateral — miss payments and you risk foreclosure. Only borrow what you can comfortably repay.

Chapter 7

How to Choose the Right Mortgage

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With so many mortgage types, how do you pick? Use this simple decision guide based on your situation.

Military service member or veteran?

→ VA Loan (best deal!)

Credit score below 620?

→ FHA Loan

Buying in rural area, modest income?

→ USDA Loan (0% down!)

Loan over $766K?

→ Jumbo Loan

Good credit, want lowest long-term cost?

→ Conventional Loan

🎯 Key Takeaway: Get pre-qualified for multiple loan types and compare total cost (APR × loan term) — not just the monthly payment.

Chapter 8

Using Mortgage Calculators

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Before talking to a lender, use online calculators to estimate your costs. They're free, instant, and can prevent costly surprises at closing.

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Monthly Payment Calc

Enter loan amount, rate, and term to see exactly what you'll pay each month.

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Affordability Calc

Enter your income and debts to find out the max home price you can afford.

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APR Comparison Calc

Plug in multiple loan offers and compare their true costs side by side.

🔗 Try Our Calculators: FaqLoan.com has free residential calculators at faqloan.com/calculators/residential

🎯 Key Takeaway: Run the numbers before you meet with any lender. Walking in informed means better questions — and better deals.