In a market where mortgage rates are rising, many potential homebuyers find themselves unsure of what types of loan products they might qualify for and what the best options are that are currently available to them. We recently spoke to Matt Kirkham with Peoples Home Equity Mortgage Lending to get some important questions answered in order to demystify the loan process and equip homebuyers with much needed knowledge.
What is an FHA loan?
FHA (Federal Housing Administration) loans are government backed loans that can require as little as 3.5% down payment. FHA is also used for borrowers that may have less than stellar credit where other loan program will not allow lower credit scores. Mortgage insurance is for the life of the loan with FHA. You can refinance out of an FHA loan to a conventional loan when you have at least 20% equity so you no longer have to pay mortgage insurance.
What is a DPA program?
DPA’s (down payment assistance) are programs that are available to First Time Home Buyers with at least 640 FICO credit score & lower debt to income ratios. THDA & the Housing Fund are great local down payment assistance programs. They can help pay for down payment, closing costs & pre-paids. In some cases, you will not have to put any money into the transaction & in some other cases you may have to put in as little as 1% of the purchase price into the transaction. THDA requires you to be a First Time Homebuyer but the Housing Fund does not.
What are low down payment programs?
Low down payment programs such as Fannie Mae’s HomeReady, Freddie Mac’s HomePossible & Freddie Mac’s HomeOne require a 3% down payment. Down payment can also come from sources other than your own funds like a gift from a relative or family member. On these loans mortgage insurance can be canceled once 20% home equity is reached, unlike government backed loans. You must be a First Time Home Buyer for Freddie Mac’s HomeOne.
If I have student loans, can I still get a mortgage?
Yes, you can!!! If your student loan is in deferment or forbearance we will still have to count either 1% or .5% of the total balance of the loan towards your monthly debt obligations. In some cases, getting an IBR (income based repayment plan) for student loans can be less than .5% or 1% of the total balance.
If you have additional questions about the home buying process or what loans you might qualify for, we’d love to help! Contact us for a no-cost, no-obligation phone consultation.