Home > Blogs > Steve Fingerman > Spring Hill Mortgage Lender

Home Financing Guide - Part 4

By Steve Fingerman

Real Estate Agent 276682

November 18, 2010 02:20 AM

As part of our continuing series for the Home Financing Guide, in this section we are taking a look at the different Government Loan Programs available today. These programs offer low fixed rate interest rates, with minimum to zero down payment. Here is the break down of the loan programs and all their details.

The Government sponsors or guarantees loan programs to provide more home financial options to middle and lower income classes and the underserved. The major programs are FHA, VA, USDA RD. There are other smaller programs and many state bond programs as well that can provide loans or down payment assistance. Each of those will be discussed below.

FHA loans are designed to help creditworthy lower-income and moderate income individuals and families to buy a home. These loans are beneficial to those borrowers that wish to put a minimum amount of down payment on the home. This program also has a little more flexibility in terms of borrower qualifications.

Some of the advantages of the FHA loan are:

Low down payment (only 3.5% may be required)
Down payment may also be in the form of a qualified Down Payment Assistance program or bona fide gift
Seller contributions are allowed
More flexible underwriting (approval)
Closing costs that lenders can charge are restricted (e.g. Loan Origination Fee cannot exceed 1%)
FHA loans are "assumable" to other qualified buyers
FHA Refinances can be streamlined (less documentation required for approval)
Some closing costs may be financed (less out of pocket expenses)
Some FHA loans allow for Energy Efficiency credits
Some FHA loans can allocate costs for repair/upgrade within the loan
The FHA loan is covered by a government loan insurance program which makes it more desirable for lenders and other institutions

The amount of money you can borrow, (which typically determines the cost of the home you can afford), is set by the US Government. You can click on FHA Mortgage Limits to find the loan limits in your area. The Federal Housing Administration (FHA) is a division of Housing and urban Development (HUD).

__________________________________________________________________________________________________________

The Government created the VA loan program as a benefit for those who served in the Armed Forces. VA guaranteed loans are made by lenders and guaranteed against payment default by the US Government. The biggest advantage of the VA Loan program is that the borrower can purchase a home with zero down.

Some of the key advantages of the VA loan are:

Low to no down payment
Seller contributions are allowed
More flexible underwriting (approval)
Closing costs that lenders can charge are restricted (e.g. Loan Origination Fee cannot exceed 1%)
The VA Funding Fee is waived if the veteran is determined to be "disabled"
VA loans are "assumable" to other qualified buyers
VA Refinances can be streamlined (less documentation required for approval)
Some closing costs may be financed (less out of pocket expenses)
The VA loan is guaranteed by the US Government which makes it more desirable for lenders and other institution

The US Government does not set a limit on the amount of money a veteran can borrow under this program. However since the loan guarantee is limited most lenders have limits on how much can be borrowed and where there is a down payment requirement on higher loan amount. Here is a list of maximum guaranteed loan limits by State and County.

The veteran must be able to provide a Certificate of Eligibility from the VA to qualify for the loan.

_____________________________________________________________________________________________________

USDA loans are designed to help creditworthy lower and moderate income individuals and families to buy a home in a rural designated area. These loans are beneficial to those borrowers that wish to by a home with no money down. Many people think of rural home being farms way out in the country. But a lot of people are surprised when they find that a property within close driving distance is actually considered rural according to the USDA.

Some of the advantages of the USDA Rural loan are:

No down payment
Bona fide gifts allowed
Seller contributions allowed
Closing costs that lenders can charge are restricted (e.g. Loan Origination Fee cannot exceed 1%)
Some closing costs (including the USDA Fee) may be financed (less out of pocket expenses)
No monthly mortgage insurance (MIP)
Non-purchasing spouse allowed
Borrower allowed to borrow closing costs on an unsecured basis

To find out whether you qualify from an Income standpoint or the Property qualifies as rural you can go to the USDA Income Eligibility or the USDA Property Eligibility website.

State Bond Programs and Down Payment Assistance Programs are usually created to help the underserved and the first time home buyer. Many times these programs may work with non-profit groups and are used support affordable housing programs. Other programs are constructed to serve specific areas (downtown core or low income areas) that do not have as much fund availability for lower income residents. There are still other loan programs that serve specific groups such as American Indians, Teachers, Firefighters and others.

Some of these loan programs are for first lien (primary) mortgages. They raise monies from the sale of Bonds to ensure that the funds are available to the target group at market competitive interest rates. Other loan programs are set-up as second liens or grants which can be used in place of a down payment. A special benefit of those kinds of programs is that many times that second lien loan amount or grant can have the debt forgiven if the person stays in the home for a specified amount of time and make their payments on time.
Since these programs differ from state to state and even city to city it is best to work with your mortgage loan professional to determine if any of the available programs makes sense in your situation.

For More Information about Government Loans in Hernando County Florida as well as the Rest Of Florida, please call me anytime and I will be happy to explain the ins and outs of all available Government Loans in Florida. We look forward to working with you and hope to hear from you soon.

Steve Fingerman