Many people across the country have seen the finance industry starting to pull back on financing in their area. Subprime is pretty much gone along with Alt-A financing. Fannie Mae (FNMA) and Freddie Mac (FHLMMC) are still out there with My Community and Flex 100 which offer 100% financing. The only problem is that those programs require MI (mortgage insurance) and if you are in a declining market you will have a 5% LTV (loan to value) cut. This means 95% is now the highest financing FNMA/FHLMC offer.
This is the reason FHA is on the rise. It finances 97.5% and the required funds from the borrower can be in the form of a gift or grant.
There is another program out there. This program is backed by the USDA and doesnt require MI. The rates are in line with FHA and sometimes cheaper. Here is some information for you on this product...
1. Full Doc transactions only
2. Rural Areas are only allowed
3. Customer needs to be below income table set by USDA
4. 102% financing off the appraised value, EVEN IF it is higher than the purchase price
***The customer cant receive money back at closing, but they can do upgrades like granite countertops or tile floors with the extra money OR use it cover all closing costs.
5. The program self funds itself. The 2% is to cover a cost to the USDA to fund the program.
6. This program is also not credit based - any score will do for this one.
7. If you score is greater than 620 - you can be one day out of Foreclosure, Bankruptcy, or CCC and you dont have to pay off ANY collections.
8. Dont have to be a first time homebuyer.
This program is not out there to take the place of SUBPRIME, but I am sure the "bad apples" that are left will use it just like they try to sell FHA to their old SUBPRIME borrowers. Yes, I am a little peeved about that last part.
I would suggest looking into this program on each of your FHA deals. You will find the borrower to be in a better place if you do. I use FHA for urban and city areas. I use the USDA program for rural areas.
I wish everyone well out there and hope this helps you to find more loans for your customers. Have a wonderful day and take care!
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