VA Loans Just Got Better

 

For eligible servicemembers, veterans, and surviving spouses, the existing VA home loan program just got better! The Department of Veterans Affairs (VA) has introduced a new policy regarding how student loan debt affects mortgage eligibility.

Related: VA Loans for Military Veterans

VA loosens Guidelines for Student Loans

The new policy makes it easier for VA eligible borrowers to obtain a purchase or refinance loan, by changing the way student loan monthly payments are calculated. Prior to this change, 1% of the total student loan debt had to be counted toward the borrower’s debt-to-income (DTI) ratio each month, regardless of actual monthly payment structure or deferment. Now, however, the payment will be calculated based on 5% of the total student loan debt, divided by 12 months. Clear as mud, right?

Lets do some math!

For example, lets say John has $65,000 in student loan debt. Formerly, his monthly student loan payment would have been $65,000 * 1% (.01) = $650. Now, his payment will be $65,000 * 5% (.05) / 12 = $271.

What if John is on an income-based repayment structure, and only pays $250 per month? The new policy also allows a statement from John’s student loan servicer to be provided, allowing the calculated payment to reflect the actual loan terms.

What if John’s student loans are in deferment? If his repayment is scheduled to begin within 12 months from the estimated closing date, we must use the 5% / 12 months rule. If not, however, the payment can be omitted altogether if written evidence can be provided that repayment will be deferred at least another 12 months from the closing date.

By changing the way student loan payments are calculated, more VA eligible borrowers will qualify, and for a larger amount. Check out our VA Mortgage Calculator to estimate your monthly payment on a desired home purchase.

What is a VA home loan?

VA home loans are originated by private lenders, banks, and mortgage companies, but the VA guarantees a portion of the loan, allowing us to offer you more favorable terms. VA purchase loans help you buy a home with a low interest rate, without requiring a down payment or private mortgage insurance (PMI). There are also special VA loan programs for Cashout and Streamline Refinances.

Who is eligible for a VA home loan?

Active servicemembers, veterans, and surviving spouses are eligible for VA home loan programs, with a valid certificate of eligibility (COE). Length of service or service commitment, duty status and character of service determine each veteran’s eligibility for specific benefits. All VA borrowers are still subject to the minimum credit score requirement of 580 and sufficient income levels to cover expected monthly obligations. For more specific information on eligibility and requirements, visit the VA benefits website.

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To apply for a VA Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Should I Payoff my Mortgage Early?

 

Should I pay off my mortgage early? How much money will it save me? How much extra should I pay each month? If I pay an extra one hundred dollars each month, when will my mortgage be paid off? As you can imagine, we get these questions a lot. They are all excellent questions, but the answers vary depending on the homeowner. Here, we’ll address some things to consider before paying off your mortgage early.

Debt-free living sounds like a dream, but even if it is financially feasible, is it the best choice for you? Paying off your mortgage early will save you the interest expense you would have incurred over time; and the higher your interest rate, the more you stand to save. If your interest rate is low, however, sending any excess cash to your mortgage servicer may not be your best option.

Related: Refinance your mortgage with FHA Streamline

So, what else could you do with that extra cash? Speak to your financial advisor about your goals for retirement. When discussing investment options, you may be surprised to hear that the expected return on some portfolios may be greater than the savings you’d see by paying your mortgage off early.

How long do you plan to stay in your home? If you’re still in your first home, and you don’t anticipate ever paying off the mortgage, it doesn’t make much sense to overpay. Conversely, if you’re in your ‘forever home’ adding a little extra to your monthly payment could mean significant savings down the road.

When it comes to debt, mortgage debt is the best kind of debt to have, but let’s be honest—it’s still debt. If it’s going to help you sleep at night, and you can afford to payoff your mortgage, then by all means, do it! Have a mortgage burning party! Apparently that’s a thing.

So you’ve weighed your options and decided to pay down your mortgage—great! Use our amortization schedule calculator to determine how much sooner you will pay off your loan by paying extra monthly. Enter your total loan amount, interest rate, loan term, and open the advanced calculations to add your extra principal payments (monthly). After you click calculate, scroll down to see the number of months it will take to pay off your mortgage.

Let’s say, for example, you have a 30-year mortgage of $160,000 at a 4.25% interest rate. If you pay an extra $100 each month, you will pay off your loan in approximately 289 months, or 24 years.

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Use Your Tax Refund as a Down Payment on a Home

Use Your Tax Refund as a Down Payment on a Home

One of the biggest roadblocks to homeownership for prospective first time homebuyers is the down payment. Given the cost of rent, utilities, student loan debt, and many other expenses, it is hard to save up thousands of dollars for a down payment. Some first time homebuyers are able to receive a downpayment gift from a family member, but not everyone is so fortunate. How then, can a prospective homebuyer purchase a home? Enter, tax season. The time of year every American loves to hate.

How Can my Tax Refund Help me Purchase a Home?

Whether you’re receiving six-hundred or six-thousand dollars in this year’s refund, it could mean the difference between renewing your lease or becoming a homeowner. If you’re leaning toward the latter, deposit your tax refund in your bank account and consult a loan officer about what to do next. Whatever you do, DON’T spend it, move it, or withdraw it in cash. Below are some examples of what you could do with it:

  • Add it to your reserves
  • Pay off debts to reduce DTI and increase chances of qualifying
  • Pay down credit card balances to raise credit scores
  • Pay for loan closing costs
  • Put toward your down payment
  • Create an emergency home repair fund

Be sure to discuss these options and others with your loan officer before making any major decisions with your refund. Each borrower’s situation is different—sometimes it is better to pay off a debt to qualify, while others would be better off with a larger down payment.

Mortgage Programs with Low to No Down Payment

  • VA – no down payment
  • USDA – no down payment
  • FHA – as little as 3.5% down payment
  • Conventional – as little as 3% down payment

Related: Purchase a home with zero down payment 

The National Association of Realtors reported a median sales price of $232,200 in 2016. The required down payment on this home would be $8,127 with an FHA loan, but zero with a VA or USDA loan. If you choose to pursue conventional financing, you’ll need $6,966 for 3% down, $11,610 for 5% down, $23,220 for 10% down, or $46,440 for 20%.

What if my refund isn’t enough?

Given the increases in home values and interest rates in recent years, a tax refund may no be enough to rely solely on for a down payment on a home. If this sounds like your situation, do not give up! Speak to one of our loan officers, who will gladly help you create a strategic plan for getting pre-approved and purchasing when the time comes.

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Housing Inventory Reaches 18-Year Low

Housing Inventory Reaches 18-Year Low

The number of active listings dropped again last month to the lowest level since 1999, according to the National Association of Realtors.  Only 1.65 million homes are available for sale, which equates to roughly 3.6 months of inventory nationwide.  This figure is downward from the 3.9 months of inventory reported in December 2015.  A healthy, balanced market should have about six-months of inventory.  See NAR’s infographic below for additional statistics on national home sales.

Housing Inventory in West Michigan

Here in West Michigan, the situation is even more dire. According to statistics from the Grand Rapids Association of Realtors, we closed out 2016 with only 1.7 months of inventory. This means that if no additional homes entered the market for sale, at the current sales pace, all existing listings would be scooped up in less than two months. As shown by the graph below, inventory levels in West Michigan have been on a steep decline for the last decade.

You may be wondering, what is causing the housing shortage? Experts blame a combination of rising demand and stagnant new home construction. Single-family housing starts are growing, but only at a snail’s pace. Builders are still struggling to operate at pre-housing crisis levels, due to the loss of skilled trades and increased labor and materials costs.

What does this mean for the upcoming Spring real estate market? Prospective buyers can expect cutthroat competition—multiple offers, over list price, in less than 24 hours, without contingencies. There won’t be time for second showings or “sleeping on it”. And shopping for a home before being pre-approved? Don’t even think about it!

What about the remaining homes for sale?  Why aren’t they selling?  Many times, it is due to the condition of the home.  Most buyers do not have the time, desire, or cash to remodel a home top to bottom.  Enter renovation mortgage programs!  Renovation mortgage programs such as the Homestyle Renovation or FHA 203k programs allow borrowers to purchase and remodel the home of their dreams in one fell swoop.

How do Renovation Loans work?

Logistically speaking, a homebuyer, after agreeing to purchase a home for a set price, attains quotes from contractors to have renovations done. An appraisal of the home is then done, taking into account the home’s value once renovations have been completed. You can then borrow up to 96.5% of that appraised value. As soon as closing takes place, funds for renovations are placed in an interest-bearing escrow account and construction begins. Once renovations are complete, a final inspection takes place, the contractors are paid out of the escrow, and you move in to your beautifully renovated new home!

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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7 Mortgage Myths Debunked

7 Mortgage Myths Debunked

It is no secret that the home buying process is a long and complicated one. Getting started can be intimidating and confusing, so we’ve compiled a list of common mortgage myths we hear from our clients. Here, we’ll break them down and explain the truth about mortgages, in plain English.

1. Having my credit pulled will drop my credit score

Many prospective buyers are hesitant about having their credit pulled because they fear it will destroy their score, but it has far less affect than you’d think. Having your credit pulled for any reason may have an impact on your overall score, but it is usually very minor.

Did you know, you actually have many different types of credit scores? Depending on who accesses your credit report, from which bureau, and for what purpose, a different scoring model is reported. Mortgage inquiries are treated differently than other credit inquiries because you can shop around for the best rate and terms. The credit bureaus do not penalize consumers for rate shopping, so any mortgage inquiries that happen within the same 45 days are treated as only 1 inquiry on your credit report.

2. Credit Karma says my score is…

Popular sites like Credit Karma and Free Credit Report are great tools for monitoring trends in your credit report, but are simply not reliable sources for determining credit eligibility. We’ve compared Credit Karma’s “scores” to actual scores we’ve pulled, and seen as much as a 100-point swing in either direction—whoa!

Don’t necessarily trust information you obtain from these websites—talk to a mortgage loan officer! In addition to providing you with an accurate credit rating, your loan officer can provide insight into what factors may be affecting your score, and what you can do to improve it.

3. I haven’t been at my job for 2 years yet

If you haven’t been in your current job or position for the last two years, don’t worry! As long as you have had continuous employment for the last two years, you’ll still qualify. Any gaps in employment will have to be detailed with a signed letter of explanation, but do not necessarily doom your chances of being pre-approved.

4. I need to payoff and close out my credit cards first

For some unknown reason, many of our clients believe they should have all other debts paid off before buying a home. While this is a noble idea and paying off debt is rarely—if ever—a bad idea, closing revolving accounts will actually do more harm than good! Pay off—or pay down—as many accounts as you can, but do not close out your credit cards. Having unutilized credit positively affects your credit score and your borrowing profile!

5. I don’t have the funds for a down payment

It is a common misconception that borrowers must have 20% to put down on any home that they want to purchase—not to mention closing costs—but that simply isn’t true anymore. There are many mortgage programs available today that did not exist a decade ago. For example, the FHA now offers mortgages with as little as 3.5% down, and both USDA and VA offer programs with no down payment at all!

6. Owning is more expensive than renting

It is almost always cheaper to pay a mortgage than rent a comparable home in the same area. Owning a home also allows you to build equity. When your lease ends on your apartment, you are welcome to leave, but the rent you paid is long gone. Buying a place of your own allows you to build your own wealth over time, not your landlord’s.

7. My bank will give me the best deal

Many borrowers, when thinking of purchasing a home, start with their trusted bank or credit union first. It makes sense, right? They know you, you’ve banked with them for years, they already have all of your personal information, it should be easy peasy, right? Wrong! Loan guidelines are the same for everyone, no matter which bank or lender originates the loan. Your bank won’t be able to cut you any special breaks or give you an extra low rate, just because you’ve been a member for a while—even if they want to!

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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FHA Lowers Mortgage Insurance Premium

FHA Lowers Mortgage Insurance Premium

Great news for homebuyers considering an FHA home loan or FHA refinance! The popular mortgage program is getting even better. The Department of Housing & Urban Development announced this morning that the FHA will be decreasing their annual mortgage insurance premium by a quarter of a percent. The upfront guarantee fee will remain the same.

Effective for new mortgages closing on or after January 27th, the annual fee—paid monthly—will decrease from .85% to .60%. This news comes only four months after the USDA decision to lower their own upfront and annual fees on rural development loans.

New FHA MIP Savings Example

Now, unless you spend your spare time studying loan program guidelines, that might sound like gibberish—so let’s do some math to demonstrate the savings. On a $200,000 home purchase, the monthly mortgage insurance premium would decrease from $142 to $100. That is a savings of $42 per month, over $500 per year!

The FHA made this decision following four straight years of growth and $44 billion dollars of value gained since 2012. They aim to protect the insurance fund while also offsetting the cost of increased mortgage interest rates.

“After four straight years of growth and with sufficient reserves on hand to meet future claims, its time for FHA to pass along some modest savings to working families” -HUD Secretary, Julian Castro

Requirements for an FHA loan

You might be thinking, that’s great, but how do I know if an FHA loan is the right fit for me? I’m glad you asked! Qualifying for an FHA loan is relatively simple and provides many benefits, including but not limited to:

  • Minimum credit score of 580
  • Down Payment as low as 3.5%
  • No early payoff penalties
  • Allows seller-paid closing costs

FHA announcement: Read FHA Mortgagee

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers, or check out our FHA Mortgage Calculator. We would love to recommend the best loan program for you and your situation.

Apply for a FHA Mortgage

Call Riverbank Finance today at 1-800-555-2098

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Millennials, Mortgages and Homeownership

Millennials, Mortgages & Homeownership

It is no surprise that millennials, generation aged 18-34, make up more than 40% of homebuyers today. Follow these simple steps to join your peers on the path to home ownership.

Don’t Wait Forever

If you find yourself waiting for the perfect house, at a great price, and the lowest rate, you may never become a homeowner. It is no secret that interest rates have risen over the last quarter, but by historical standards, rates are still extremely low. Appreciation of home values went up 6.8% nationally in 2016, and are predicted to increase another 4% in 2017. Home sales are also up 15%. With interest rates and housing prices on the move, waiting could cost you more than you think.

Stop Renting

Studies have shown, you’re probably paying about 20% more in rent than you would for a mortgage on the same property. This is great news for your landlord, but not for you! When you own your own home, not only is it yours, so you can DIY it to your hearts desire, but you are contributing to your investment, not your landlord’s.

Don’t Assume the Answer is No

You know what they say when you assume, “Don’t make a…” Anyway, you get the point. Many potential buyers just assume they will not qualify, so they don’t even try. Student loans and little savings will not automatically disqualify you from obtaining a mortgage. In most cases, only 1% of your total student debt must be counted toward your debt-to-income ratio, and many no-or-low-downpayment programs are available today.

Get Pre-Qualified

One of the biggest mistakes potential homebuyers make is looking at homes before speaking with a loan officer. It is important to know now only if you qualify for a mortgage, but how much, and if the payments are comfortable for your financial situation. You would not want to fall in love with a home outside of your price range, or waste the sellers’ time.

Hire a Buyer’s Agent

After you have been pre-qualified for a mortgage, find a buyer’s agent you can trust. Searching for a home on your own will not save you any money—in fact it could do just the opposite! Realtors play a vital role in the real estate transaction, including showing the property, writing the offer, handing negotiations, obtaining concessions (such as closing costs), and help coordinate all of the involved parties.

Do Not Give Up

Don’t just give up if you don’t qualify today! Ask your loan officer what barriers are preventing you from being qualified, and how to improve. Sometimes, all it takes is a small downpayment gift from a family member. If poor credit is the problem, inquire about what problems may be negatively affecting your score, and work to resolve and remove them.

According to a recent survey conducted by mortgage giant Ellie Mae, 90% of millennials want to own a home, just don’t believe they can yet. 45% of those polled said lack of downpayment was their barrier, and only 30% said inability to qualify was the issue. Whatever the problem may be, do not give up. Talk to your loan officer who will be happy to advise you!

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Quiz:

How to Ensure a Fast Mortgage Closing

If you’ve ever purchased a home, you know how stressful the process can be. What should be an exciting experience can quickly turn to panic, as the target closing date approaches. So, what can be done to prevent delays along your path to homeownership? Check out our list of tips and tricks below to meet (or beat!) your closing date.

Get Pre-Approved. Never shop for a home without first speaking with a mortgage loan officer. You wouldn’t want to fall in love with a home you may not be able to afford.

Tell the truth. Be 100% honest and transparent with both your mortgage loan officer and your Realtor. If you provide incorrect or incomplete information, it could cause major problems during the underwriting process.

Work with professionals. Find an experienced Buyer’s Agent to represent you and help you negotiate. It will make all the difference.

Be Responsive. Always send required documents within 24 hours of our request for them. Always send complete documentation (all pages). Be sure they are legible and not cut off. The Underwriter will conduct a thorough review of all documents provided by the borrower, realtor, loan officer, and title company. Additional document requests throughout the process are completely normal and necessary to close.

Ask Us Questions. Review all documents that you receive and let us know if there is something you do not understand. It is important to be aware of all costs associated with your mortgage.

The Appraisal. The appraisal is a required out-of-pocket cost to the borrower which generally ranges from $400 to $600. This must be paid when ordered via credit or debit card. If repairs are required by the appraiser, a final re-inspection will be required, which is an additional out-of-pocket cost to the borrower of approximately $150-$175.

Be patient. The total time to complete the mortgage process varies by loan program, property type, and borrower qualifications. You can expect 30-60 days from application to closing, but the process may take more or less time depending on the situation.

Don’t Jeopardize your Approval. DO NOT deposit large amounts of cash into your bank account. DO NOT transfer large amounts of money between accounts. DO NOT apply for new debt. DO NOT have your credit pulled. DO NOT change jobs or pay structure.

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Quiz:

How to Get Rid of Mortgage Insurance

How to Get Rid of Mortgage Insurance

So you want to break up with your monthly mortgage insurance—we don’t blame you! When you purchased your home, there’s a good chance you didn’t have 20% to put down, right? Mortgage insurance is a great option, in that it allows buyers to increase their purchasing power, but comes with an unfortunate side effect of additional monthly fees.

Every situation is different, so it is important to understand your loan, to determine your options for dropping your mortgage insurance. Below are the greatest factors affecting your ability to say “Sayonara” to your mortgage insurance (MI).

• Type of mortgage insurance you’re paying
• Which lender holds your loan
• Age of your loan (time since closing)
• Your loan-to-value ratio (LTV)
• The property type
• Whether or not your property value has increased

Types of Mortgage Insurance

If you’re paying a monthly fee on a conventional loan, it is called private mortgage insurance (PMI). If you paid an upfront fee at close and a monthly fee on an FHA loan, it is called a mortgage insurance premium (MIP).

Who Owns Your Loan?

If you have a Conventional loan, is it Fannie Mae or Freddie Mac? This is important because they have different rules for when MI can be removed. If you have an FHA loan, you will need to know its age and the percentage of down payment you gave at close.

What is Your LTV?

The Loan-to-Value ratio is essentially the financed amount divided by your home’s value, expressed as a percentage. Let’s say for example that you purchased your home for $200,000 with 10% down ($20,000). You financed $180,000 of the $200,000 purchase price, which gives you a loan-to-value ratio of 90%. Your LTV will decrease as you make payments, as well as when your property value increases.

Has Your Property Increased in Value?

If you’ve made considerable improvements to your home, it has probably gone up in value! You’ll need to order a new appraisal to confirm the updated value, which generally costs between $400-$600 out of pocket.

Related: Refinance Your Home Without an Appraisal

Canceling MIP on your FHA Loan

If you closed on your loan on or after June 3, 2013 and you put less than 10% down, MIP can never be removed. With a down payment of 10% or more, you’re still required to pay MIP for a minimum of 11 years. If your loan closed before that date, your MIP will be automatically cancelled when your LTV reaches 78%, but only after you’ve paid the MIP for a minimum of 5 years, and only if you have not had any late payments in the last year. In most cases, the only way to stop paying MIP on an FHA loan is to refinance your mortgage.

Canceling PMI on your Conventional Loan

Ditching the PMI on a conventional loan is easier and more flexible than on an FHA loan. Your MI will be cancelled automatically as soon as your LTV reaches 78% OR when you reach the midpoint of your mortgage (15 years into a 30 year mortgage). Again, you must be current on your payments for the cancellation to occur.

If you pay close attention to your mortgage statements and are anxious to kick your MI to the curb, you can request cancellation once your LTV reaches 80%. It is also important to note that while Fannie Mae allows homeowners to make extra payments to get to 80% LTV faster, Freddie Mac does not.

As mentioned above, if you’ve made considerable improvements to your property, you may be able to remove PMI much sooner. You’ll need to order a new appraisal to document all improvements, but as long as your LTV is below 75% or less (for Fannie Mae) or 80% (for Freddie Mac), your PMI will be removed!

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Quiz:

Conforming Loan Limits Increased

As home prices across the country continue to rise, the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) have announced increases in conforming loan limits for 2017.

For the first time since 2006, the FHFA has increased the maximum loan limit for conventional loans through Fannie Mae and Freddie Mac from $417,000 to $424,100.

Conventional Loan Limits Increased

Conforming loan limits for Fannie and Freddie are determined by the Housing & Economic Recovery Act of 2008, which requires that after a period of declining home prices, the baseline loan limit may not rise until home prices return to pre-decline levels. Until this year, average home prices remained below the level of those in the third quarter of 2007—considered the pre-decline price level—so the baseline remained the same. According to the FHFA, the Home Price Index (HPI) value for the third quarter of 2016 was approximately 1.7% above the value for the third quarter of 2007, meaning the baseline loan limit will increase as such.

Related: More about Conventional Mortgage Loan Limits and FHA Mortgage Loan Limits

FHA Loan Limits Increased

Less than a week later, the FHA announced a similar loan limit increase for a whopping 2,948 U.S. counties in 2017. Only 286 counties will remain at 2016 levels. Here in Michigan, the FHA conforming loan limit will rise from $271,050 to $275,665. It will apply to cases assigned on or after January 1st, 2017.

These loan limit increases may seem marginal, but point to a better future. The FHFA and FHA recognize that home values across the nation have recovered, and have responded with an opportunity for homebuyers to increase their buying power.

Some financial institutions have speculated that this 1.7%, $10,000 increase to the conventional loan limit could lead to 40,000 additional originations with $20 billion in loan balances across the country.

Related: One Percent Down Conventional Loan

2017 Loan Limit Summary

  • FHA Conforming Loan Limit $275,665
  • Conventional Conforming Loan Limit $424,100
  • USDA Conforming Loan Limit $275,665
  • VA Conforming Loan Limit $275,665

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

Request Information Now!

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