4 Loan Programs You Need to Know About

Article by:  by Dean Hartman on September 16, 2010 
Courtesy of Keeping Current Matters 

While a vast majority of all mortgage products are fairly “vanilla”, there are a couple of other flavors of loans that, if you meet the criteria, may help you get approved, or may help make your purchase more affordable monthly, or lessen your need for as much cash to close. Recognize that each of these loan programs are all fully documented loans for income, assets and credit worthiness, but at the same time they have nuances that can be powerful for many borrowers.

 

1. VA Loans

As a country, we need to honor those who have served. For eligible Veterans, 100% financing is available up to a $417,000 Purchase Price which may include a seller’s concession to cover closing costs. As an insurer of the loans, the VA charges a Funding Fee which can range 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 or not. (Consult your mortgage professional for your personal situation.) 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. And REMEMBER, FIRST TIME HOMEBUYING VETERANS ARE STILL ELIGIBLE FOR THE $8000 TAX CREDIT, IF THEY GET IN CONTRACT BEFORE APRIL 30, 2011 AND CLOSE BY JUNE 30, 2011!!!

2. USDA Loans

If your home is in an eligible location (typically rural in nature….heck, this is a program available from the US Department of Agriculture) and you fall below the ascribed income limits, the USDA loan is a wonderful option to explore. Up to 100% financing with a financed 2% Guarantee Fee at typically lower rates than conventional loans and NO MONTHLY MORTGAGE INSURANCE PREMIUM! There are no asset or reserve requirements and closing costs can be totally gifted to the buyer. There are even special provisions for repairs to be financed into the loan, if the appraisal has room. Most loan professionals are unaware of the magic of this loan….talk to one who knows it, if you think you could qualify. Check out http://www.rurdev.usda.gov/rhs/sfh/brief_rhguar.htm to see location and income qualifications.

3. 203K Loans

Often discussed in this space, the FHA’s 203K Program is one loan that is used for both the purchase and renovation of a home. With so much of the housing inventory needing some sort of rehabilitation, this loan program’s popularity is at an all time high. Read past blogs on the qualifications and process, and make sure your loan professional explains the plusses and minuses for you.

4. Purchase Reverse Mortgages

For Seniors over 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, many seniors who had hoped to buy their home “all cash” are now unable to do that. A Purchase Reverse can be a perfect solution to help seniors make the transition to the next phase of their lives. Counseling requirements and a good loan officer can explain the logistics and opportunity.

Today, I wanted to say that there are still some wrinkles out there in the mortgage world. To know you are making choices after you have looked at all your options, make sure you are working with an expert loan officer who understands how the programs work and if you should entertain them.