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Many people dream of owning a
home but the home loan process can be confusing
for many first time home buyers. The Metzler
Group at Mortgages Unlimited, Inc. offers first
time buyers many home loan options and will
assist the buyer in finding the best home loan
for them. First time home buyer programs can
offer lower interest rates, low down payments,
or reduced taxes.
There
is a wide range of home loan
options available to you. Some
offer payments that are fixed for
the life of the mortgage (fixed
rate loans), while others feature
smaller initial payments that
could fluctuate with changes in
the interest rate (adjustable
rate loans). The right choice for
you depends upon your individual
financial lifestyle. The home
loan experts here have the
experience to help you understand
the best options for you based on
your current situation. Call one
of them today and schedule an
appointment to learn about which
choice might be right for you.
Who is eligible?
First time home buyer
programs are designed to help borrowers who may
not have enough money to pay the full cost of
the down payment or the closing costs on a
mortgage. These programs make obtaining a
mortgage more cost effective. There are even
programs specifically for residents of each
state. First time home buyer programs are
typically available to those who have not owned
a home for the past three years.
First-Time
Buyer Programs in Minnesota
MHFA
Minnesota Housing Finance Agency
Benefits of MHFA (Minnesota
Housing Finance Agency) State Assistance
Mortgage Loans
-
Below-market
interest rates
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Interest-free loans to help with
down payment and closing costs
as well as monthly payments.
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No extra fees or
discount points
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30-year fixed (Option of a
40-year term under the CASA
program)
FOUR Mortgage
Loan Programs
Minnesota Mortgage
Program (MMP)
MMP offers
mortgage loans through local
lenders to low and moderate
income homebuyers throughout
Minnesota.
HOME Help
Up to
$14,999 in down payment and closing
cost assistance
for those who
qualify. Call 651-552-3681 for
qualifying details
Minnesota City
Participation Program (MCPP)
Loans are
traditionally available from
April through December
through MHFA’s lender
network.
CASA provides
access to pools of mortgage
loan funds for community
based partnerships that
support targeted local
homeownership efforts.
Homebuyers obtain CASA loans
through lenders
participating in the
CASA program.
A 40-year
loan term is available to
eligible CASA borrowers.
This option increases
affordability through lower
payments.
Basic Program Guidelines
To be
eligible for a
Minnesota Mortgage
Program loan you must:
NOTE:
If the home you want is more expensive,
or your income is above the limits, you
still have plenty of options with other
loan products such as
"My Community
Mortgage", "Home Possible", "FHA
Loans", "VA loans",
"USDA Rural Development
loans", and "Flex 97".
Call for details!
Homeownership Assistance Fund (HAF)
The
Homeownership
Assistance Fund (HAF) is available only
to borrowers participating in one of
MHFA’s mortgage loan programs. The
program provides Entry Cost Assistance
to help borrowers with their down
payment and closing costs and Monthly
Payment Assistance,
which pays a portion of a borrower’s
monthly mortgage payments during the
early years of the loan.
Borrowers
qualify for HAF assistance is they meet
one of the following criteria;
-
Eligible for CASA program
-
Single headed household
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Household of color or
Hispanic
ethnicity
-
Household contain person(s) with
disabilities
-
Borrowing purchasing in a low
income tract
-
Household earns
less than 60% of medium income
Interest
free HAF loans are paid back when the
homeowner sells, refinances, no longer
occupies the home or pays off the first
mortgage.
First Time Homebuyers
who are qualified for
one of the Minnesota
Housing First-time
homebuyer programs
(Minnesota Mortgage
Program, Community
Activity Set Aside or
Urban Indian Housing
Program) can use the
charts below to
determine if they also
qualify for the
Homeownership Assistance
Fund (HAF).
MMP Program
Borrowers at or
below the following
household incomes
representing 60% of
Median Income qualify
for HAF. These limits
also apply to the
Minnesota Urban
and Rural Homesteading
(State Funded) Program.
Income limits are based
on HUD median family
income estimates and
calculated at 60% of the
greater of state or area
median income:
CASA and Targeted
MMP Borrowers must
meet the program income
limits for First-time
homebuyer programs to use
the Homeownership Assistance
Fund at or below the
following state or area
median household incomes:
*
For MHFA loan
purposes, first time homebuyer is
defined as anyone who has not owned a
home or an interest in a home in the
past three years.
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FHA Loans -
Federal Housing Administration
FHA loans, also
referred to as
“government” mortgages,
are insured by the Federal
Housing Administration. The
purpose of the FHA is to make
housing more affordable for more
homebuyers. To do this, they
offer more lenient loan
qualifications in comparison to a
conventional loan. The lower down
payment and relaxed qualifying
guidelines combine to make FHA
loans ideal for first-time and
low-to-moderate income
homebuyers. From 1934 until about 1999, this was really
the only low down payment loan. It is probably
how your parent bought their first home! The
minimum out-of-pocket cost to a buyer is
only 3.5%% - and the entire 3.5%% can be a gift!
 FHA
minimum down payment changed to 3.50%
down effective January 1, 2009 |
What is an FHA Loan?
You've heard the name
before, but did you know that FHA
financing is one of the most popular
ways to become
a homeowner or refinance an existing
mortgage. FHA's mortgage insurance programs
help low- and moderate-income families
become homeowners by lowering some of the
costs of their mortgage loans. FHA mortgage
insurance also encourages mortgage companies
to make loans to otherwise creditworthy
borrowers and projects that might not be
able to meet conventional underwriting
requirements, by protecting the mortgage
company against loan default on mortgages
for properties that meet certain minimum
requirements--including manufactured homes,
single-family and multifamily properties.
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WARNING: The state
of the current mortgage industry,
combined with recent legislation has
made FHA available to many small
brokers and inexperienced Loan
Officers who previously did not have
access to FHA programs.
Don't let
these rookies practice FHA financing
on you! We are TRUE
FHA Experts. |
FHA vs. Conventional Financing -
Find out why more and more people are
turning back to FHA!
Although there are similarities
between FHA and Conventional mortgage loans
there are also some big differences. While
interest rates are similar, credit
guidelines are different. FHA allows for
borrowers with less than perfect credit to
receive the same interest rate as a borrower
with unblemished credit.
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Finding the right home starts with a
great search tool
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Most applicants are inundated with a variety
of terms describing mortgages that are
available on the market. The most popular
include, Conforming, FHA, and VA.
FHA was created by the Federal Government to
provide affordable housing financing for
qualified borrowers. FHA insures 100% of the
loan, eliminating the lender's risk. The
borrower pays an upfront insurance premium
which is approximately 1.75% of the loan
amount. This money can be, and almost always
is financed directly
in the loan amount. The borrower also pays a
monthly premium of .55% of the loan amount
divided by 12 months. FHA requires down
payment of 3.50%. This money can be a gift. No
reserves are required.
Closing costs
can be financed in the loan amount.
IT SOUNDS COMPLICATED, but it really is
very simple to understand. Just call us at
(651) 552-3681 and we'll explain it to you.
Borrowers must provide proof of sufficient
income to show ability to pay the mortgage,
and have at least OK credit.
FHA guidelines are a bit more relaxed, but
it is NOT a bad credit loan! All applicants
on the loan MUST HAVE a minimum middle
credit score of 620 in all but the most
extreme cases to get an FHA loan.
FHA interest
rates are extremely competitive with
conventional Fannie Mae and Freddie Mac rates.
Down payment requirements can be low.
In contrast to conventional mortgage
products, which frequently require down
payments of 10 percent or more of the
purchase price of the home, single-family
mortgages insured by FHA make it possible to
reduce down payments to as little as 3.50%
percent.
Many closing costs can be financed.
With most conventional loans, the borrower
must pay, at the time of purchase, closing
costs (the many fees and charges associated
with buying a home) equivalent to 2-3
percent of the price of the home. This
program allows the borrower to finance many
of these charges, thus reducing the up-front
cost of buying a home. FHA mortgage
insurance is not free: borrowers pay an
up-front insurance premium (which may be
financed) at the time of purchase, as well
as monthly premiums that are not financed,
but instead are added to the regular
mortgage payment.
Some fees are limited. FHA
rules impose limits on some of the fees that
mortgage companies may charge in making a
loan. For example, the loan origination fee
charged by the mortgage company for the
administrative cost of processing the loan
may not exceed one percent of the amount of
the mortgage.
HUD sets limits on the loan amount.
To make sure that its programs serve low-
and moderate-income people, FHA sets limits
on the dollar value of the mortgage loan.
FHA uses a complicated formula to determine
the loan limit in EACH COUNTY across the
country.
Click here to see the county limit you are
interested in.
Fannie Mae & Freddie Mac loans are
conventional loans made at the risk
of the lender without benefit of any
government guarantee or government
insurance. A conventional loan with an LTV
(loan to value ratio) of greater than 80%
requires primary mortgage insurance, which
can be paid monthly. The borrower must
(usually) have 5% of his/her own funds for
the down payment and 2 months reserves on
deposit.
100% conventional zero down financing is
becoming extremely hard to find and qualify
to receive. Because of this, FHA has come
back with a vengeance!
Requirements of a conventional loan
applicant include excellent credit, job
stability with sufficient income, a sizable
down payment, and low debt to income ratios.
Borrowers who meet Fannie Mae or Freddie Mac
conventional guidelines are rewarded with an
interest rate only slightly lower than an
FHA interest rate.
FHA Mortgage Insurance.
Mortgage insurance is required under all
programs where the borrower does not put at
least 20% down payment. Under the OLD FHA
rules, mortgage insurance was required for
the entire loan period. Conventional loans
are able to eliminate mortgage insurance
when you reach 80% loan-to-value (20%
equity). A BIG advantage over FHA. NOT
ANYMORE! FHA mortgage insurance is
eliminated at 78% loan-to-value (22%
equity), just like conventional loans!
The FHA
Streamline Refinance
If you currently have an
FHA mortgage you are eligible for one of the
simplest money saving refinances available
today. The FHA "Streamline Refinance" allows
existing FHA borrowers to reduce their
interest rate without having to jump through
hoops. Basically, if you have made on time
payments on your current FHA loan for the
past 12 months. You get (almost) an
automatic approval for the streamline
refinance!
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VA Mortgage Loans (Veteran
Administration)
VA loans, also
referred to as
“government” mortgages,
are guaranteed by the Federal
Government. These loans are
available for the benefit of
eligible veterans of the armed
services, active-duty personnel,
reservists, and their spouses. VA
loans allow for some of the most
relaxed qualifying requirements
of any loan, including no down
payment for qualified borrowers
and stable and predictable fixed
interest rates. It’s
possible to obtain a VA loan with
close to zero out-of-pocket cost.
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The Combo loan comes in many
versions, but typically the
first mortgage is 80% of the
purchase price, the second
mortgage is 10 of 15% of the purchase
price, and the remaining 5 or 10% is
the borrower’s down payment.
It is typically used to eliminate private mortgage
insurance and may enables homebuyers
to reduce their monthly payments.
Be careful about combo loans, as they sometimes
appear to offer better deals in the short-term,
but may cost you significantly more in the
long-term. The Combo loan may also be used
as a “jumbo cruncher”
to reduce the monthly payments
for borrowers whose loan amounts
exceed the conforming loan limit, as Jumbo loans have slightly
higher interest rates.
UPDATE: Since 2007, combo
loans over 90% (1st and 2nd together) have become very difficult to find and
have pretty much disappeared.
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Flexible
97 and My Community, Home Possible
These products allows for financing up to
97% of the
purchase price. The product allows for reduced
documentation, flexibility in underwriting,
expanded debt to income ratios, and flexibility
in the source of down payment. Down payments can
come from the borrower’s own funds, a gift from
a family member, a grant from a non-profit,
employer or governmental agency, a secured loan,
an unsecured personal loan from a relative,
municipality or non-profit organization and
employer-assistant housing funds. Homebuyers,
including those purchasing their first home, may
often choose the these loans for theirs low
down payment. Homebuyers must have good to excellent
credit to be eligible for these loan product.
2008 update:
Loans over 95% have become increasingly
difficult if not impossible to find due to the
great mortgage market meltdown of 2007. This is
a good alternative to FHA loans.
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Standard FIXED RATE
Conventional LOANS (minimum of 5% down) Fannie
Mae Freddie Mac
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With fixed rate
loans, you’ll always know
what to expect with a
predictable, non-variable
mortgage payment. Your monthly
principal and interest payments
never change because your
interest rate stays the same for
the duration of the loan. While
fixed rate loans generally have
higher interest rates than
adjustable rate loans, they do
offer predictability that many
homebuyers, especially those on a
fixed or modestly increasing
income, find comforting. Fixed
rate loans also offer the option
to refinance if interest rates
decrease and may be the right
loan for you if you plan to be in
your home for a while.
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Adjustable Rate
Mortgages (ARMs) are loans that
generally provide an initial rate
that is lower than the standard
fixed rate loan. After an initial
fixed rate period (1, 3 or 5
years), the interest rate can
adjust annually based on the
movement of a specific index plus
a margin not to exceed 2 percent
every year and 6 percent over the
life of the loan. Your monthly
payment changes as the rate
changes annually. To the
borrower’s advantage, the
initial payment of an ARM is
usually low, permitting the
purchase of a home that otherwise
may be unaffordable with a fixed
rate mortgage, although there is
a risk of higher payments later.
An ARM may be right for you if
you need the lowest possible
initial payments or if you
don’t plan to keep your home
for more than a few years. Jumbo
loans are available at adjustable
rates.
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A Mortgage
Credit Certificate or MCC is a certificate
awarded by your local government agency
authorizing the home loan borrower to take
certain federal income tax credits. The credits
awarded help to free up funds and make the
monthly home loan payments more affordable for
the homeowner. First time home buyers are
typically the candidates eligible for an MCC but
in special cases that you may discuss with your
mortgage consultant, this requirement may be
waived. Income and purchase price requirements
also vary state to state and should be covered
in conversations with your home loan
representative.
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Many City, County, State,
and community homebuyer programs reduce the down
payment and out-of-pocket costs the borrower
must pay. The assistance can be a full gift, a
partial grant, a repayable grant. These types of
programs usually are added on top of a
traditional FHA home loan to cover down payment
and / or closing costs. These programs often
requires the home buyer to take a class on home
ownership in their state. Upon completion of the
class, the homebuyer will receive a certificate
that reduces the cash requirement and expands
the qualification ratios. Community homebuyer
programs have been making it possible for many
people to have the opportunity to buy a home who
often didn't have the cash to buy a home. Some
examples are: City Living, Dakota County
First-time buyer, etc.
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Contact
our home loan expert at (651)
552-3681 to help you develop a
financing plan customized to fit
your individual situation.
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