There are many different loan options for first time home buyers and USA Mortgage continues to find the right programs and opportunities for their clients. Below are some of the many options available:
1. MHDC Gift Money:
MHDC (Missouri Housing Development Commission) offers up to 4.5% gift money towards down-payment and closing cost for qualified first-time home buyers. This is an amazing option for prospects who don’t have sufficient funds for closing or down-payment.
2. USDA Loans:
USDA isn’t a first time home buyer program but it’s a great option for someone trying to buy homes in qualified locations. Offering No Money down home loan with very low-interest rates and monthly funding fee makes it a great option in our list.
3. Conventional Home Ready or Home Possible:
Both these options offer down-payments as low as 3% with lower monthly PMI. They are a great option for clients how to want to put down less money but still be able to get a great loan.
4. FHA Loans:
FHA isn’t limited to first time home buyers but it does offer so many options and solutions for first-time homebuyers which makes it to the top of our list. FHA loans typically tolerate lower credit scores and higher debt to incomes and are great alternatives to many other programs. The also offer very competitive rates with a reasonable monthly mortgage insurance.
Please call or email our office and talk to one of our loan officers for more information.
Consider The Benefits
USDA loans are backed through the Rural Housing Division of the U.S. Dept. of Agriculture. They are available to millions of eligible primary home buyers with low to moderate incomes or scarce funds for down payments.
Features, benefits and things you need to know:
Zero Down – No down payment is required for USDA loans. Thirty-year, fixed-rate loans with no pre-payment penalty are the norm. Rates are very competitive with conventional loans.
Eligible Property – USDA loans are limited to “rural” areas, though you might be surprised by some of the suburbs of major metropolitan areas that qualify by that definition. Homes should be modest in size and cost and constructed per local codes and regulations.
Eligible Borrowers – Funds are available for qualified borrowers who earn up to 115% of the area median income. Even candidates who have had past credit issues with late pays, bankruptcies or foreclosure may be eligible. Borrower’s income must support the proposed payments and meet the program requirements for approval. Primary occupancy is required. This program is not for investment properties.
Benefits – Minimum cash to close. The USDA Guarantee Fee and eligible closing costs may be financed. Gift money, grant money, and seller contributions are allowed.
If you have questions, want to find out if you qualify or want to learn about areas that meet the rural designation criteria, please don’t hesitate to reach out. We’re happy to help.
One Thing You Must Know About Mortgage Rates
The lowest mortgage rate is the best, right?
The lowest rate certainly sounds best. But did you know the lowest rate doesn’t always mean the lowest cost?
Mortgage interest is just one component of the real cost of owning a home.
Interest rates are a reflection of expectations for inflation and the supply/demand equation for money. Rising rates typically mean rising inflation, too.
When inflation occurs, the value of your home will typically rise. You can subtract that increase in value from the interest you pay for a better gauge of the real cost of owning.
The opposite is true too. If Mortgage rates are low and inflation is absent, values stagnate or even drop, potentially adding to you real cost.
In simple terms, a low rate and no appreciation can be more costly than a higher rate with appreciation. Recently, the markets have provided for both low rates AND rising prices. If you’re ready to take advantage of conditions that may not last or just want to learn more, reach out.
When prices are rising, why not let the market help you?
It’s great to save up for a large down payment of 20% or more. Yet, when prices are on the rise, saving quickly enough to keep pace can be extremely difficult. In times such as these, why not let the market build equity for you instead?
Building Equity. Owning a home in an appreciating market can build equity faster than most people can save. For example, a $200,000 home that appreciates by 6% gains $1,000 per month in equity.
Getting ahead of rising prices and rates. Purchasing with a small down payment often means you’re required to purchase mortgage insurance (MI or PMI for Private MI). Your total monthly payment will be higher; however, the cost of mortgage insurance today can be a lot less expensive than buying a more expensive home at a potentially higher rate tomorrow.
Diverting rent payments to equity. If you’re currently renting, chances are good your monthly expense is already similar to a payment to own. When you consider that part of your payment is a reduction of the principal balance, the real net cost can be far less.
Using appreciation to your advantage. While you’re saving to buy, appreciation (or rising home value) works against you. After you’ve purchased your home, rising value works with you to build equity and may even mean you can eliminate the cost of mortgage insurance more quickly.
Earning tax advantages. Many home owners enjoy income tax saving based of the mortgage interest and real estate taxes they pay each year. Talk to your tax professional to see if tax advantages may reduce the actual cost of owning for you, too.
It pays to view MI as a means to an end. In all likelihood, it will be a temporary cost, which may pay for itself over and over again.
If you have questions about MI, appreciation and Mortgage interest rates, reach out. We’ll be happy to share our experience with you today.
Still Working When Others Might Not
The FHA Loan program continues to evolve, and total mortgage insurance costs have risen. While the increase makes these loans less advantageous than in the past, they are still a good option if your needs and situation preclude you from qualifying for a conventional loan.
Here are a few of beneficial features:
Low Down Payment:
As little as 3.5% down will work in most instances, and 5% covers most others.
Lower Total Cash to Close:
Sellers can help pay closing costs, and borrowers can receive gift money towards their down payments.
Streamline and Cash Out Refinances:
Subsequent refinancing can be far easier and more lenient than with conventional loans.
Purchase and Rehab Financing:
The FHA 203K loan can be an excellent option for the purchase of homes in need of a quick spruce up or even major remodeling when you don’t have sufficient funds to do it on your own.
OF course, we’ll always fully assess your situation, educate you on available options and help guide you to financing that suits your needs.
You Can’t Keep a Good Thing Down
Ever try to hold a life preserver underwater? It’s hard, isn’t it? It can be equally hard for the Fed to keep Mortgage rates low against a rising tide of market expectation.
The Winds of Change. The Fed’s actions to keep interest rates low have worked for a time, but eventually, market forces will take over. In fact, the market has recently become more influential, and the Fed can do little to counteract the trend.
The Trouble with Targets. The Fed has announced some economic benchmarks, including inflation and unemployment rates, for adjusting the current policies. Now that everyone knows when to expect action, smart investors are operating ahead of the curve.
The Factors. Rate increase triggers include positive economic news and hints of policy change from the Fed. Market influence comes from mortgage bond investors, institutions and sovereign nations. When these forces act in unison, their influence is greater than the Fed’s alone.
What Can We Do? We can lock-in rates for a purchase or refinance before they change. A fixed monthly mortgage payment now can create a sense of stability for decades to come.
Waiting Can Have a Cost. The combination of higher rates and prices can make what’s affordable today out of reach tomorrow.
Are you ready to take action before it’s too late?
Refinance & Reduce Your Balance Faster:
With lower interest rate, you pay more principal with each payment, especially in the first years of the loan. EXAMPLE: After five years of payments on a 30-year loan of $200,000 at 4% you would pay $19,706 in principle vs. $17,105 on the same at 5%. That’s an extra $2,601 in benefits on top of the $7,052 of interest savings. Total advantage = $9,653.
Own Free and Clear Sooner:
Two ways to make this happen:
- Pay extra principle: Apply your monthly savings toward principle to shorten your loan term by several years. EXAMPLE: using the same loan terms from above, pay your $118/ month savings as extra toward principle and cut the loan from 30 to 24.33.
- Refinance for a shorter term: Rates on 15-year loans are typically lower than 30-year loans, so a payment on a shorter term may still be within a comfortable range for you.
Maximize Your Rate of Return Through Investments:
If you deposit the $118 monthly saving form the example above into a tax deferred account earning 6% over time, it will grow to $81,852 in 25 years. if you use the savings to increase your 401K contribution with a 50% employer match, that figure would equal $122,782. Earning 6% on your money may be tough right now, yet historically, returns on a property balanced and diversified portfolio are 7% or better.
Tap Into Your Equity.
If you need to make repairs or improvements, you may be surprised at how much cash you might be able to free up without increasing your monthly payment.
Many factors go into calculating value of a home. Most importantly, recently sold comparable properties must be considered. “Comps” should be similar in location, size, style, room count, condition, utility, etc.
Appraisal is part art and part science, and the latter is hard to change. Sometimes, the hardest thing for owners is to be objective about their own homes. Always realize the appraiser is limited to the true comps available, and those comps will not always support the value you may expect.
To influence the “art” part of the equation, keep your home in good condition. Present it for appraisal as you would for sale. Prepare written information regarding improvements, and offer an extra copy for your appraiser to keep. Be punctual, courteous and respectful, and your appraiser will do for you the best that can be done.
Lenders must use a management company to handle their orders and in most cases loan officers aren’t allowed to contact or talk to an appraiser about the value or results. If the appraisal isn’t satisfactory and there is a doubt in finding comps or the value, we can provide additional comps that the appraiser may have overlooked and management company will contact eh appraiser with those and ask for reconsideration.
The Application: After determining that refinance will be beneficial for you, we can start the application which is very similar to the original application once you bought the house. Your loan officer will collect the initial documents which could consist of assets, income and other verification.
Processing: Next, it’s getting the processing started which is gathering the homeowners insurance, title, ordering the appraisal and ordering all other verifications.
Underwriting and Approval: The underwriter will review all the provided information and documentation to make sure they do meet the lending guidelines. Additional documentation may be requested during this process as the underwriters are held responsible for the decisions they make and have to make sure anyone else picking up the file comes to the same conclusion.
Closing/Funding: After all the conditions are met, underwriting will give us the clear to close and green light to move to the final step. The closing package will compile all documents and provide us with the closing disclosure which you have to approve 3 days before closing (business days as Sundays don’t count). There is a THREE DAY RECISSION OR WAITING PERIOD and after this three days your Home loan will be funded and your old loan will be paid off.
Every situation is different, and many small steps will accrue between these 4 steps. Please realize we all have a common goal, and that is to get your loan closed and funded with the best options as we value our clients business and their investments.
Please call or email any of our loans officers for any questions. also, Visit our full home loan refinance page.
Understanding the HOW and WHY of Escrow Accounts
Escrow accounts provide for the timely payment of taxes and insurance on your home. This prevents tax liens, loss of property and any lapse of insurance coverage.
As part of your regular mortgage payment, 1/12th of the annual cost is collected. These funds are held and paid out as bills come due. If taxes are $2500 and insurance is $1,000 for a total of $3,500, you’ll pay $291.66 into escrow each month. The balance will build until an outgoing payment is made.
The minimum required balance is usually a two-month cushion to assure that sufficient funds are in the account even if payments are interrupted.
The minimum is different from the starting amount to make sure sufficient funds are available to make the first tax or insurance payment when due.
So how does an escrow account help you?
- You have a consistent monthly expense instead of large bills a few times per year.
- The money in the account is always yours. You receive any remaining balance on the sale or refinance.
- You might enjoy more competitive interest rates. Loans without an escrow account will often incur a price adjustment.
If you have questions about escrow accounts or mortgages, in general, please give us a call. We’re here to help.
Before making an offer on your first home, make sure to complete these four steps.
1. Know how much you can afford and how much cash you will need:
Knowing what you qualify for before searching for any homes will save you time and disappointment that can come from falling in love with a home that is out of reach. Getting pre-qualified for a loan will help you understand your numbers and affordability.
2. Location, Location, location.
Learn and research the neighborhoods you’d like to live in, drive through the neighborhood different time of the day and week. Check out the schools, shops, crime rate and talk to the neighbors to learn more about the area. Based on your goals and lifestyle, the area of where you buy a home is curial.
3. Choose your property type:
There are many different property types, single family residents, condos, multi-family, townhomes, new constructions, etc. learn and know all the pros and cons about each property type in your area. Again, your future goals and plans will play a role in your decision. If you are looking to expand your family or use the property for investment in the future could change your choices on type of property you would buy.
4. Obtain a valid pre-approval before you make an offer:
Finding a right mortgage lender and obtaining the pre-approval is the initial steps of searching for a home. Loan pre-approval means your lender has reviewed all the necessary documents and verified with the underwriting to make sure they are efficient for you’re to receive a commitment letter. There still may be other documents and verifications such as appraisal, title work and home owners insurance that has to be obtained but at least you know that the money is secured for your financing.
Buying a home is one of the largest investment most people make in their lives, and we know how important such a decision is for you and your family. We would love to be part of that process and walk you through it step by step.
If you are saving up to buy your first house or wonder if you have enough equity to trade for another, you may be relieved to know that for most buyers there are still low down payment options available.
$0 Down: VA (Veterans Administration) and USDA (US Department of Agriculture) both offer a zero down loan programs as long as you meet their criteria.
The USDA Loans are an amazing option for buyers who are looking to put zero down and still get great rates and terms. The VA loans are also 0 down loan program as long as you meet their standards.
3.5% down: The federal housing administration (FHA) has been around for years and allows as little as 3.5% down. FHA Loans are also more lenient than most other programs and tolerate lower credit scores compared to many other programs. FHA also has an option for renovation (203K) which is a great loan to buy houses that need some TLC.
5% down: Fannie Mae /Freddie Mac conventional loans are available with down payments as low as 5% the minimum on these programs can depend on credit scores, income, property type and occupancy.
Are you surprised at how low some of these down-payments are? Some think the 20% is what takes to buy a house these days but with many different options available, it will make the dream of owning a house much easier.
USA Mortgage offers a variety of programs, and we pride ourselves to offer many options along with the best rates and terms. Call or email us today to see which program will work best for you.
There are many different factors to consider when choosing the best loan program option. That is where the skills and knowledge of your loan officer will play a significant role in your decision. One of those choices is the option between FHA Home loans vs Conventional loans. Here are some pros and cons of these two products.
- They only require 3.5% down payment, which is less compared to a traditional conventional loan with 5% down.
- FHA loans tolerate lower credit scores and yet offer very competitive rates.
- They allow non-occupant co-borrowers and gift money both.
- FHA loans tend to have more flexible underwriting guidelines.
- Mortgage Insurance is the same, regardless of score or debt to income as long as borrowers are approved for the loan.
- The monthly MI is for life of the loan (when putting down less than 10%)
- There is an upfront funding fee of 1.75% that is added to the total loan amount.
- There is no option to buy the mortgage insurance up-front or eliminate it by putting down 20%.
- No investment properties or second home purchases are allowed.
- There are no up-front funding fees. What you put down will go toward the equity with no added fees for the loan.
- Borrowers can buy the mortgage insurance outright or do LPMI (Lender Paid Mortgage Insurance) which means lenders uses the rate to pay for it themselves instead.
- Mortgage Insurance will automatically drop-off once 78% loan to value is reached, regardless of the initial down payment.
- Conventional loans offer a first time home buyer program that requires only 3% down, and if you qualify for the My Community or Home Possible programs, then the mortgage insurance rate is also going to be lower.
- Conventional loans allow for second home (10% down) and investment property (20% down) purchases.
- Conventional loans are more particular about credit scores, debt to income ratios and down-payment amount. These parameters drive rates and terms.
- Conventional loans tend to have more strict underwriting guidelines.
- Conventional loans allow gift money OR non-owner occupant co-borrowers, but not both at the same time.
It’s our job to structure the best home loan option for you, and we’ll do our due diligence to make sure our borrowers get the best product based on their financial goals and plans.
USDA home loans have been a great option for home buyers looking outside of city limit and smaller towns. USDA loans offer $0 down-payment for qualifying buyers who are looking to buy in the eligible USDA areas. Buyers don’t have to be a first time home-buyer but in most cases, they can’t own more than one property at a time.
USDA home loans Rates and Fees:
- Offers very competitive interest rates.
- There is a 2% upfront funding fee which is added to the loan.
- Monthly funding fee for USDA is at 50 BPS which is lower compared to FHA and some of the conventional loan options.
- There is an option for financing closing cost to the loan as long as the property is appraised higher than the purchase price. for example, if the purchase price is at $100K and the appraisal value at $102K, buyers can add $2,000 to their loan amount towards eligible closing cost and pre-paid items.
USDA rules and guidelines highlights:
- There is an income limit for each county per household. Clients can see the income limits for USDA Home loans on their website or call lenders for questions.
- The property for USDA home loans has to be in an eligible location.
- USDA properties have to meet the minimum HUD standards.
USA Mortgage and USDA Loans:
- USA Mortgage has been awarded number one lender in Missouri four years in a row with USDA office.
- Offering competitive rates and terms.
- Working with clients who don’t have perfect credit to qualify them for such a loan.
If USDA loan is something you are interested about or want to learn more about it, Call or Apply online for more information.
MHDC which stands for Missouri Housing Development Commission has made some modification on all loans reserved on March 2, 2015. MHDC has been a great option for first time home buyers for down-payment assistance and help with some of the closing cost.
Prior to the new changes MHDC down-payment assistance program was offering 3.5% as CAL (Cash Assistance Loan). Below are some of the highlights of MHDC down payment assistance program along with the new changes.
– MHDC offers up to 4.5% towards down-payment and closing cost for first time home buyers.
– MDHC has limitation on income per household.
– There are maximum loan amounts per county.
– Home buyers don’t have to be first time home buyer if buying in a targeted area or a qualified veteran.
– MHDC loans rates are set and only change by MHDC.
– MHDC doesn’t have any restriction for being inside or outside city limits. (Great alternative for USDA loans)
Please call one of our experienced loan officers for any questions regarding this loan program. You can also visit our website for more information.