USDA home loans have been popular in the last few years due to the crash of subprime market and the credit restrictions. USDA loans are one of the only loans beside VA loans that offer 100% financing and with their low monthly MI, it makes them a great option, but you need to watch out for some of the guidelines that aren’t covered on the cover and can come up as your loan progress with the lender.
The basic rules and guidelines about the income limits, location of property, condition of property are all the first steps we use to qualify the borrower and here are some of the more detailed rules that you need to watch for before making the offer on your dream home.
1. USDA Home loans are mostly made for borrowers who can’t afford to put any money down or don’t have any options with other loan programs. Now if you have great credit and 20% of your down-payment sitting in your bank, USDA probably will ask you to find alternative option.
2. If you are buying a house that has over 5 acres of land, USDA office will look at these case by case, which it does defeat the purpose of the whole loan in rural areas!
3. Although USDA isn’t a first time home buyer program, you only can own one home at any given time with this loan. So, if you do have three investment property and want to buy your own home with the USDA, you may run into some problems.
4. If you do meet the income eligibilities for USDA but have someone else living in your house with you who also makes money and has income, then you need to add that to the household income and calculate it based on their income, even if they aren’t going to be on the loan or title.
If you need to learn more about the USDA loans, call or email me anytime.
FHA Home Loan could be the right loan program for you. FHA is a government loan which has been around for several years.
FHA requires just 3.5% down-payment. Which means it will finance 96.5% for your home loan. FHA will have a 1.75% up-front MI (Mortgage Insurance) which can also be financed to your loan. This would total your loan to be 98.25%. Regardless of how much you put down on your home loan you will still be charged a monthly MI.
Credit is usually easier for FHA loans, even if you have a lower credit score it will not effect the rate as much.
Don’t automatically assume that you can not be approved for a FHA loan. It may meet FHA requirements depending on your circumstance. You possibly may have options that can improve your poor credit scores within time. Some home buyers may need to spend six months to a year improving credit history.
Your first step should be going to your lender and seeing if you can first be pre-qualified, if not they can take a look at your credit and determine if there are solutions to improve your credit scores. Contact FHA credit counseling or first-time homebuyer counseling.
MHDC which is also known as, Missouri Housing Development Commission, is a first-time home buyer program, which is offered by the states. MHDC is a form of the FHA loan which does allow down-payment assistance.
When considering a new home you should go by these guidelines:
MHDC will allow borrowers to use 3% down-payment assistance which will bring the financing to 99.5% with only .5% down.
USDA requires the property to be in certain locations, where this loan does not have this requirement; any FHA approved property is eligible for the MHDC loan.
MHDC requires you to meet the income limit
If the property is sold or refinanced less than 3 years, the down-payment assistance money needs to be paid back
MI (Mortgage Insurance) options are about equal to the FHA loan requirements; regardless of the down-payment, MI will be charged.
First-time homebuyers and qualified veterans are the only exceptions to participate with this loan program
Eligible properties for the MHDC loans are, single-family detached, duplexes, semi-detached, condominiums, townhome, modular or manufactured housing.
Contacting a loan officer before house shopping should be your first step in purchasing a new home, you will want to see if you’re “pre-approved” so you can see how much you can afford to borrow and what you can afford to pay on your new home.
Are you considering doing a renovation? You should consider using the Renovation loan. This loan is a form of FHA financing, allowing for refinance or purchase, this loan has all that FHA has to offer, plus allowing home buyers and owners to use the future value of the home and get money for the renovation.
Your minimum loan amount will be $50,000.00 (Including Improvements)
Your maximum loan amount will be $271,000.00 (Including Improvements) or FHA maximum loan amount by counties
Your option for loan type is a 15 year or 30 year fixed purchase or refinance loans
The house must be at least 1 year old
The house must be currently or soon be owner occupied
Home improvement costs must be completed by approved, licensed and insured contractors
The 203 K Renovation loan has a list of eligible improvements and required improvements. for a complete list please click here.
We all remember the days that a real estate broker was an insurance agent, financial advisor, Mortgage broker and a CPA all at the same time. Today, things are a little bit different. Consumer protection laws, conflict of interests, and so many other regulation in place that makes it hard to operate as an stop shop.
Considering all these laws and limitations, there are still brokers and real estate companies that have in-house lenders, now these lenders may not be affiliated with the real estate agencies but they pay a hefty amount of rent every month to buy the businesses from that office and eliminate the competition. It is perfectly understandable to be ambitious and want to succeed in business but not at the cost of your client’s benefits and your agents in the office.
There are a lot of banks and mortgage companies out there and maybe most of them offer the same programs and options but there are some niche products that aren’t that popular or profitable that could benefit your clients and make an extra deal for the real estate agent.
I called one of our local real estate brokers for a time frame to do a presentation for their agents, the broker emailed me back ” We already have a lender that provides that service”. I wrote back ” Mr. Broker, Have you heard about the steering laws and RESPA violations, have you seen the penalties for a mortgage company paying 10 times more than what the market value of rental in order to get an office in your agency?”
Tear down the walls, let in the talent and knowledge so your agents and their clients can benefit from it.
We all have heard about what is a good time to refinancing our current home loans to a lower interest rate, but is this a good idea in all cases?
There is more than just the interest rate to consider when refinancing your home or buying a home. Choosing a right loan program, and having the right amount of fees are just as important. Make sure to look at all the options and don’t just go for the lower rate as a lot of lenders use that as bait. Compare your current loan to the proposed loan on short and long terms to make sure you are benefiting by saving monthly payments and building equity.
Sometimes getting rid of your monthly PMI (Private Mortgage Insurance) is more beneficial than just getting a lower rate. Changing the terms on your current loan program can make a difference to your monthly payment and equity. I have refinanced a lot of my clients from the 30 years to 20/15 years loans with little or no increase to their payment, they are now saving a lot of interests and will be building equity much faster.
I have heard this over and over from some of the agents “My mortgage lender can do it, why can’t you?”. Even with the black and white kind of rules and guidelines in lending, there are still some niche programs and products that not everybody has access to or don’t know how to do properly.
There are different entities who do lending; Banks, Mortgage Brokers, Mortgage Bankers etc. Using or selling your loans to different investors (secondary market) is what determines how many programs and different products one can offer. The more investors, the more options and most likely better rates and fees.
So, is this the case all the time? How come a lender can do an FHA loan, and some can’t get it done? Well, most lenders, especially banks and mortgage bankers who use their own money to fund the loan and have some skin in the game, will put overlays to protect their warehouse lines and limiting the buy backs on the sold loans.
Sometimes, Mortgage bankers who do their underwriting decide to get a file done that is considered “irresponsible lending” just to make the agent happy or make a buck. In my opinion, if you are a good loan officer and company, you should know and understand this is why we are in a bad economy situation and our housing market is a mess, because we did lending like it was giving out candy on Halloween, if you had a right costume and could pretend to be who we want you then you got the candy!!
We need to pay attention to our lending practices and even though we all want our clients to be home owners, sometimes it isn’t a right decision for them, and as professionals we should understand that and prepare them to become homeowners not to set them up for failure while collecting our checks.
I should say one of my favorite home financing options is VA home loan, with the $0 down payment option and no MI (Mortgage Insurance) they are superior to any other loan out there. VA Loans do offer very competitive interest rates as well, and USA Mortgage in Columbia, Missouri has a lot of different options on closing cost and fees.
Also to all the above benefits, these loans are for qualified veterans, and it makes the work very joyful by helping them become homeowners. These loans tend to have easier guidelines as far as qualifying for credit goes.
If you are shopping around for a VA loan in Missouri, give us a call or take an application online. We can get your pre-approved in just a few minutes and help you buy your dream home.
Keep looking for upcoming blogs on VA loans, we will blog about the benefits, how to qualify, refinances and guidelines soon.
We talked about VA home loan being one of the most popular loans for our veterans. These loans have plenty going for them, and the benefits are phenomenal.
No down-payment for these loans is very desirable and not having MI (Mortgage Insurance) makes them even better. VA loans tend to have great interest rates (usually better than Conventional loans) and have the much easier qualification to go with that.
There are of course some restrictions for VA loans that we will talk more in next chapter, but here are some of the highlights of VA loans:
· 100% financing.
· No monthly MI.
· If the veteran is disabled and qualifies for the disability, there will not be any upfront funding fee that could be up to 3.3% if it is the multiple uses of VA loan.
· Great interest rates (fixed and ARM options).
Call or email us today to get qualified for your VA Mortgage loan. You can click on the banner below to take our full online application.
1. First-time home buyers.
The typical first-time FHA home loan applicant is young and in the early phases of their careers, and they may still have student loans and other debt. An FHA home mortgage often costs less and is more lenient to indiscretions with credit and payments. FHA home loans don’t require a big down payment at the closing time, which can be appealing. The FHA mortgage requires a low 3.5% down payment, and that money can come from a variety of sources including HUD down payment assistance grants. Closing costs can be finically hard for people to bring to the table. Typical closing costs for FHA home loans are around 2% or 3% of the total mortgage. FHA mortgage terms may allow you to build in closing costs into your mortgage.
2. Borrowers with lower or no credit scores who can’t qualify for Conventional loans.
FHA loan guidelines do not require a minimum credit score. Borrowers can be approved with little or no credit history, as long as there is no negative credit history on their report. For those that have credit, you need only one year of clean credit history.
3. Borrowers who can’t put down 5% minimum downpayment.
FHA loans require the lowest down payments. Traditional loans require a minimum of between 5%- 10% down while FHA requires as little as 3% down. Low down payments allow people to buy homes and start building equity faster.
4. Clients with higher debt to income ratios and can’t qualify with conventional.
You can qualify with a higher total monthly debt for an FHA loan than you can for a conventional loan. Conventional loans allow for a new house payment of 28% of your monthly gross, or pre-tax income while FHA loans allow 29%. Your total monthly debt, including car payments, credit card payments and installment loans must stay under 36% of your monthly income for a conventional loan, while FHA loan guidelines allow up to 41%, allowing more people to qualify.