Home Buying 101 - Step 7: Other Loan Programs
February 27th, 2009 categories: Home Buying 101
This is the seventh post in a series of twelve on buying a home, now updated for 2009.
In addition to conventional loans, home buyers may also utilize one of the following government insured or guaranteed loans. In fact, FHA mortgages now make up around 25% of all mortgages, compared to 2% during the height of the real estate market. Here’s what you should know about the loans - although please note this continues to change.
These are loans you, as the consumer, may have to bring to the attention of your mortgage lender, especially the programs that aren’t commonly used.
CHFA
CHFA, or Connecticut Housing Finance Authority, offers a “first time home buyer” program which can be a great deal for the right person. There are income limits (currently $81,000/year for a 1-2 person household in most of Hartford County) and sales price limits (vary greatly depending on area and number of units). The property must be owner-occupied throughout the entire term of the loan and if the home is sold within 9 years, the profit may be subject to a recapture tax if certain conditions are met.
There are some really great things about the CHFA program:
–Low interest rate - currently 5%
–More lenient credit guidelines
–First time home buyer only means that you cannot have had ownership in a property in the last 3 years
–You can borrow more than 100% in some cases
–Borrowers can lock in rate for 4 months
–Single family properties, condos and 2-4 unit multi-families are eligible
FHA
The Federal Housing Authority insures loans for first time home buyers that lenders may not otherwise offer. Similar to CHFA in that FHA loans have certain borrower guidelines, FHA has sales price limits as well as credit requirements. FHA allows borrowers to put as little as 3.5% down. And, a borrower can ask for closing costs or credits but they can’t exceed 6% of the purchase price.
VA
Available through many lenders, VA loans are guaranteed by the federal government to give military personnel more access to home ownership. Eligible borrowers include active and inactive members of the armed forces who meet a certain criteria for length and time of service. Reserve forces may also qualify, depending on length of service, as may those who were discharged and widows/widowers provided spouse’s death was service related. The biggest negative to VA loans is a lending fee which varies depending on the borrower’s eligibility. However, the lending fee may also be financed.
If you qualify, there are many positives about getting a VA loan:
–No Private Mortgage Insurance
–No money down required
–100% financing plus closing costs, which are limited
USDA Rural Development
The USDA provides 100% financing for mortgages on homes in “rural” areas, including many in Connecticut. Towns like Burlington, Avon, Granby, Canton, East Windsor and Suffield in Hartford County and towns such as Marlborough, Hebron, East Hampton, Colchester and Ellington in surrounding counties.
There are income limits - for Hartford County the current limit for a 2 person household is $73,150 and the program is only available for owner occupied, single family homes.
But there are also some significant benefits for qualifying properties and buyers:
–Seller may contribute closing costs.
–No down payment required.
–Competitive rates.
–No minimum credit score.
–No monthly mortgage insurance premium.
Here are some other programs:
Good Neighbor Next Door - for teachers, law enforcement, firefighters or emergency technicians.
Home of Your Own - for home buyers with disabilities.
Military Homeownership Program - a CHFA program for military personnel.
Police Homeownership Program - CHFA
You might also enjoy reading:
Five Things Every Home Buyer Should Know About Mortgages and Mortgage Lenders
Want Some Free Money? Little Known Loans and Grants Can Help You Buy a House
Do you dig real estate news, tips and advice? Sniffing around for pet-related information in Connecticut? Get Unleashed - the blog that’s helping to find homes for people and pets.
Don’t forget that you can also offer 100% FHA financing with DAP programs and renovation loans with up to 110% of the after improved value. These are great tools I use to help people buy homes and get 100% + financing at great rates and since FHA is not FICO score driven this opens up the playing field!
Leo Namiot
Well Fargo Home Mortgage
Thanks for the comment. I’ve done a numner of deals with 100% and the DAP but none with renovation loans. Is this CHFA? Owner-occupied?
When you get a chance, I’d love to get some additional info on this.
Can I mail you some information? If so what address is good? Please drop me a e-mail and if you want some more information.
LeoLends@yahoo.com
With the sub prime market falling apart I have some great alternatives to help get buyers into homes.
Hello, I was doing a quick search on what rates are available for someone rebuilding after a foreclosure.
If someone had a foreclosure 3 years ago and now has a 660 FICO, do you know what sort of rate they could get?
Could they get a CHFA loan at 5.625%?
Thank you.
I think with CHFA you either qualify or don’t - there is no higher rate for one person based on their credit.
The credit score may not be the issue - it will definitely be when the person foreclosed. With CHFA, you must not have been the owner of another home in CT for at least three years.
I would have the person call a CHFA lender to get pre-approved. That’s the only way to know for sure.
Also noticing for example the Connecticut Housing Investment Fund (CHIF) Energy Conservation Loan (ECL) progam income limits are much higher for most people than CHFA. For example CHIF ECLs are available to three person households with average IRS adjusted gross income over the last two years of $145,980. http://www.chif.org/index.html
Thanks for the useful article.Those CHFA, FHA and other loan types are the real headache for me. It is hard to understand all those bureaucratic rules and documents. But thanks to your article, with it’s help everything is more clear for me now. I will definitely bookmark your web and look forward to another great articles.