Last week, we discussed some of mortgage programs available to low-income borrowers. Those discussed were the most commonly known options for the most common needs.
In the second part of this article series, we are going to introduce you to some of the lesser known options which low-income borrowers can use for their more unique situations.Talk to us about your mortgage needs.
USDA Low Income Loan (USDA Direct Loan)
Many people mistake this program with the more commonly known Zero-down loan option or the USDA guaranteed loan but the two programs have distinct differences and are meant for different functions.
Let’s take a look at these in detail.
For starters, the USDA Direct Loan is specially structured to cater to the needs of very low income borrowers who cannot obtain any sort of home financing using other financing programs.
And while the USDA Guarantee Loan is backed by the USDA via a dispensing lender, a USDA Direct Loan is directly funded by the department.
To be eligible for the program, the borrower must have an income that is below 50 percent of the area median income.
Credit is still of high importance. A good credit history, as well as the ability to repay monthly mortgage payments should be established. However, the borrower should be able to show that they have exhausted other traditional mortgage options. They may be able to receive subsidy for repayments.
The loan is repaid within 33 to 38 years. The government sets the rates which will be dependent on whether the borrowers use payment assistance subsidy or not.
The FHA 203k – Buy and Fix Up a Home with One Loan
Given that there’s a current shortage of available homes in the market, it’s possible that some people nod to slightly damaged properties. Or, it could be that the home is located in a good neighborhood, only that there are a few things that need to be improved.
In such a case, you can get a home improvement loan via the FHA 203k loan program.
The FHA 203k loan program is backed by the federal government. It lets the eligible borrower get financing for the purchase or refinance of a home plus a fund intended for the necessary repairs or renovations of the property.
The loan may also include:
- Up to 20 percent contingency reserve that can be used to ensure the completion of the repairs and renovations in the event that the cost runs more than the estimated cost
- A provision that can be worth 6 months of mortgage payments allowing you to live elsewhere during remodelling
To be eligible for the program, you should be able to demonstrate that you have sufficient income to cover for the payments. A perfect credit is not required, though it’s always advantageous to demonstrate a healthy rating with low debt-to-income ratios.
This program type is not created for investors and solely for one to four unit properties only. Condominium and townhome owners, however, may be able to use the program for their home interior project needs.
Fannie Mae’s HomePath® Ready Buyer Program
Established by mortgage giant Fannie Mae, this program gives home shoppers the opportunity to score a 3 percent in closing cost assistance for the purchase of a Fannie Mae-owned property.
These Fannie Mae-owned properties which is listed in HomePath.com are foreclosure homes which could save you around $4,500 on a home that normally costs $150,000 in the market.
These properties are only good for buyers who intend to live in the property. During the first 20 days that the property is listed on the market, the buyer should place a bid.
The buyer then should complete a homeownership course which would cost them $75 to be eligible for the assistance. This cost will be reimbursed by Fannie Mae upon closing.
An important tip: you can combine both the HomePath® Ready Buyer program and HomeReady Mortgage on the same home purchase when purchasing a HomePath® home.
HUD’s Good Neighbor Next Door Program
The United States Department of Housing and Urban Development helps the nation’s “good neighbors” contribute to community revitalization while becoming homeowners via its Good Neighbor Next Door Sales Program.
The HUD sells the homes at half the price via this program. It is available to certain public-sector employees such as law enforcement officers, teachers, firefighters, and emergency medical technicians.
Eligible homes are listed in this website. Please check the listing and follow the instructions on how to submit your intent to purchase.
If there are multiple interests on the home, the final selection will be made via lottery.
You must then meet the “good neighbor” requirements and comply with the HUD’s regulations for the program.
This is a limited list and covers only the most common federal programs today. Mortgage programs have vastly evolved to tap into the varying needs of the equally diverse borrower market. Feel free to explore your options.Click to See the Latest Mortgage Rates»