INTRO TO LOAN PROGRAMS FOR SFV RESIDENTS

January 14, 2018

 

Buying a home can be a tedious, overwhelming, and expensive process.  Finding a home you love is hard, getting the money to pay for it is even harder. Fortunately, these helpful programs will help you find and/or finance a home while sparing your bank account and sanity.

 

FHA

If low credit is a problem, a Federal Housing Administration loan might be the answer. FHA loans are designed to help lower to middle class homebuyers take out loans with a down payment as little as 3.5%.

 

Compared to conventional loans, FHA loans have smaller down payments, lower closing costs, and competitive interest rates. Credit score requirements can vary according to the lender, which can help even homebuyers whose low credit typically causes trouble getting conventional loans.

 

A downside is that private lenders receive mortgage insurance from the FHA incase borrowers default. This is an extra ongoing cost to the borrowers, and while most mortgage insurance on conventional loans are canceled after 80% is paid off, the insurance for FHA loans remains the entire span of the loan.

 

VA

Loans through the U.S. Department of Veteran Affairs helps homebuyers who are in the military, veterans, or surviving spouses. VA loans often require a small funding fee in place of a down payment. Veteran loans can save homebuyers exponentially as they do not require mortgage insurance.

 

The loans are available to practically all service members and their spouses. Eligibility can vary depending on the applicant’s length of service as well as whether it was during war or peace time. VA loans are typically more generous and accommodating than conventional loans.

 

The only problem is that the application process requires a lot of meticulous paperwork. Applicants often have to seek additional help from mortgage lenders and real estate agents with experience dealing with VA loans just to complete the process.

 

USDA

If you are looking for a home in a rural area, consider a USDA loan. The Department of Agriculture offers loans with low interest rates and zero down payments. The program is not limited to farms but also some suburban areas. The USDA offers loan guarantees, direct loans, and home improvement grants.

 

A downside is that the loans only apply for specific regions, and limitations are often inconsistent as they vary depending on the area. Depending on the area, homebuyers may only be limited to remote and unpopulated areas, which might deter most potential buyers. If you’re looking for a quiet life in the country, this is most likely your best bet.

 

ENERGY EFFICIENT MORTGAGE PROGRAM

Going green not only saves the Earth, but your wallet as well. The Department of Housing and Urban Development provides great incentives with their Energy Efficient Mortgage Program. Energy saving expenses can be financed as part of the mortgage, which allows larger loans for buyers and easier-selling homes for sellers.

 

Even though the price of the mortgage will go up, the savings on utility expenses ends up making the total cheaper for homeowners. Longtime homeowners can also use EEM by adding it to their existing mortgage, which will help them save money in the long run and increase the resale value of their home. Sometimes you got to spend money to save money.

 

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/eem/eemhog96/

 

HUD 203(K) LOANS

Fixer-uppers are cheap to buy, but can be expensive to remodel. The FHA provides home improvement loans that can be added onto your mortgage. This will save homeowners money with lower interest rates and longer repayment terms compared to using credit cards to finance renovations.

 

These loans provide more flexibility when paying for home improvements. There are two types of 203(k) loans: Limited, which covers aesthetic repairs or upgrades, and Standard, which covers structural improvements.

 

Some downsides for the loan are a required insurance premium, an additional funding fee, and a whole lot of paperwork. However, unlike a personal loan, you can write off a percentage of the mortgage interest on your taxes with a 203(k) loan. In the end you will have a nicer home with a greater resale value.

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203k--df

 

GOOD NEIGHBOR NEXT DOOR

If you’re an active public servant looking for a new community, then home buying just got a little easier. This HUD sponsored program was designed to attract teachers, police officers, firefighters, and emergency medical technicians to revitalization areas by offering 50% off the list price of homes.

 

A requirement for the discount is that you will have to remain a resident for at least 3 years, and must provide proof of residence annually. After the 3 years are up, homeowners can sell and turn a substantial profit, that is if you decide not to stay.

 

The selection is limited, and sometimes competitive, but at half price it is worth looking into. Houses are listed on the GNND website for up to seven days.

 

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/gnndabot

 

DOLLAR HOMES

You can get a lot at the 99 Cent Store, but a home? The FHA sells foreclosed homes at a discounted rate, and have even claimed to sell some of these homes for as little as one dollar. Though such a cheap price for a home is extremely rare to find on their online listing, they still offer affordable alternatives.

 

The program was designed to assist low income families as well as sell FHA possessed homes that have not sold in over six months on the marketplace. You’d be surprised what deals you might discover while looking through their online listing.

 

https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/dhmabout

 

FANNIE MAE AND FREDDIE MAC

Fannie Mae and Freddie Mac are two government sponsored enterprises designed to expand the secondary market for mortgages. Real estate and banking can get pretty complicated, especially when they’re combined, but it’s much simpler than they’d like you to believe.

 

Both companies purchase loans from banks and resell them to homebuyers for a guaranteed fee. They work as a middleman between homebuyers and the banks. Fannie and Freddie guarantee the bank the lone will be paid, which typically results in a lower interest rate and down payment. Both companies operate similarly, but Fannie Mae typically buys loans from commercial while Freddie Mac deals with thrift banks.

 

http://www.fanniemae.com/portal/index.html

http://www.freddiemac.com/

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