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
• 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

* 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 - 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% - and the entire 3% can be a gift!

The FHASecure Initiative. This new initiative was designed in the fall of 2007 in an effort to help some people facing foreclosure. Under traditional FHA guidelines, FHA did not provide financing for people who have had recent late payments - especially late mortgage payments. Under the new FHASecure program, you still need to "qualify", but FHA will disregard late payments for qualifying if, and only if the following conditions are met. You have a NON FHA adjustable (ARM) mortgage You were current on your mortgage before your rate adjusted All your late payments are AFTER your loan rate adjusted

                                

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.

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.

Finding the right home starts with a great search tool

Saint Paul / Minneapolis (Twin Cities) MLS Only

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 1.5% of the loan amount. This money can be financed directly in the loan amount. The borrower also pays a monthly premium of .5% of the loan amount divided by 12 months. FHA requires down payment of 3%. This money can be a gift. No reserves are required. Closing costs can be financed in the loan amount.

Borrowers must provide proof of sufficient income to show ability to pay the mortgage. FHA guidelines are more relaxed, such as; a bankruptcy that was discharged at least 2 years ago, the use of alternative credit (utilities, cable TV, auto or medical insurance premiums, child care, school tuition, furniture or appliance store accounts) in lieu of traditional credit, and higher debt to income ratios. FHA interest rates are extremely competitive with conventional 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 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 (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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Combo (80-10-10) (80/15/5) (80/20)

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. 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 100% 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 97% have become increasingly difficult if not impossible to find due to the great mortgage market meltdown of 2007.

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Standard FIXED RATE Conventional LOANS (minimum of 5% down)

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

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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Contact our home loan expert at (651) 552-3681 to help you develop a financing plan customized to fit your individual situation.