Most mortgage products are fairly plain, simple, and straight forward. However, there are a few programs that may help you get a loan approved, make your purchase more affordable monthly, and/or lessen your need for a large down-payment – if you meet the criteria. It is important to note that 4 of these these loan programs are all fully documented loans for income, assets and credit worthiness, but at the same time they have some features that can be powerful for many borrowers.
1. VA Loans
For eligible Veterans of the military, 100% financing is available for a purchase price up to $417,000, which may include a seller’s concession to cover closing costs. As an insurer of the loans, the VA charges a funding fee that ranges from 0-3.3% of the loan amount based on the loan-to-value and/or whether this is the first time the veteran is using the benefit. Your mortgage professional can help you determine the amount of the funding fee. What is terrific is that the VA funding fee can be added into the loan amount and is not a required cash outlay for the customer at closing. Talk to your loan officer about the VA’s unique approach to income qualifying, credit analysis, and who is eligible to co-sign.
2. USDA Rural Development Loans
If your home is in an eligible location (typically rural in nature) and you fall below the ascribed income limits, a USDA loan is a wonderful option to explore. USDA loans offer up to 100% financing, with a financed 2% guarantee fee, at typically lower rates than conventional loans and with no monthly mortgage insurance premium. There are no asset or reserve requirements and closing costs can be totally gifted to the buyer, or paid by the seller. There are even special provisions for repairs to be financed into the loan, if the value of the property justifies such repairs. Most loan professionals are unaware of the magic of this loan….talk to a mortgage professional who understands these loans to see if you qualify. Also, you can check out http://www.rurdev.usda.gov/rhs/sfh/brief_rhguar.htm to see location and income qualifications.
3. HUD/FHA 203K Loans
HUD/FHA’s 203K Program is a loan that is used for both the purchase and renovation of a home. This loan allows the homebuyer to finance repairs that are either lender required or desired by the homebuyer. With so much of the housing inventory in need of some sort of rehabilitation, this loan program’s popularity is at an all-time high. Please contact your mortgage professional directly on the qualifications and process. Be sure your loan professional explains the plusses and minuses for you.
4. Colorado Housing and Finance Authority (CHFA)
CHFA is unique to Colorado, and we are lucky when compared to other states to have such a financially strong organization supporting our local housing markets. Although other states have similar organizations, very few are on the level of CHFA. If you fall within the prescribed income limits, you can qualify for a CHFA loan. CHFA is also available statewide both in rural and urban areas. CHFA lends the buyer 3.000% of FHA’s required 3.500% down-payment as a small second mortgage. CHFA does require that the buyer have a minimum cash investment of $1000, which amount may not be credited back to the borrower at closing, and it also cannot be a gift. However, when viewed from the perspective that most rental properties require at least a $1000 deposit, this is a very small investment and can be very manageable. The majority of CHFA’s loans go to first-time homebuyers; however, they also have programs for move-up buyers, or non-first-time homebuyers. Importantly, when using a CHFA loan, a move-up or repeat home-buyer cannot own another home.
5. Purchase Reverse Mortgages
For seniors over the age of 62, regardless of their income or credit history, the ability to borrow approximately 50% of the purchase price of a home and have no mortgage payment is certainly something to explore. With retirement plans slashed and anticipated equity shrunk, some seniors, who had hoped to buy their home for cash, are now unable to do so. A Purchase Reverse Mortgage can be a perfect solution to help seniors make the transition to the next phase of their lives. The best part about this program is there are absolutely no income or credit requirements to obtain this loan. All that is required is that the borrower meet the minimum age requirement, have the minimum down-payment (calculated based on purchase price and age of the borrower) and that the property passes an HUD/FHA appraisal inspection. Counseling requirements and a good loan officer can explain the logistics of this loan, and help in determining if it is the right loan for you.
Although there are still some wrinkles out there in the mortgage world, it’s important that all home buyers know about these programs. The most important first-step is to make sure you are working with an expert loan officer who understands how the programs work and if you should consider them.
Christian Durland
Cherry Creek Mortgage
