Tuesday, January 13, 2009

It’s Baaaaack! 100% Financing

With the mortgage meltdown onset, the only 100% financing options available for borrowers became limited. However, there’s a new game in town that might make sense for you…..

100% financing was a very popular option in the lending world via FHA approved grants, however, it became a memory not too long ago. Programs like AmeriDream and Nehemiah enabled a borrower to obtain their FHA minimum down payment through a seller as a financed gift. After much haranguing back and forth between pro and con parties, FHA retired the grant program. The only 100% financing options that remained were Veteran Administration loans (VA) and Rural Housing loans (RECD).

While both the aforementioned 100% financing programs are fantastic, they are limited in their scope. To qualify for a VA loan, you have to be a veteran (surprise, surprise, right?). And the RECD loan, limited by income and loan size, also has to be in a designated rural area (funny how the names of these programs give it away, huh?). So the average Joe city dweller, who never served in the arm forces, was out of luck.

Well, I’ve got good news. There is now a new 100% program, and it isn’t limited to veterans or geographic region. It is, however, targeted to low to moderate income earning families. That means the household income can’t exceed $54,800. In addition, the Freddie/Fannie acquisition cost limitations apply for your area (that is your loan limit). You have to have a good debt to income ratio (simply speaking, total up your monthly required payments that appear on your credit and divide it by your monthly gross income) of no more than 41%, but you can wiggle a little higher. And you need a credit score of at least 680. If you meet these criteria, you may want to explore it further.

How it works is the lender allows you to get a first loan at 95-92% loan to value (LTV, loan amount divided by appraised value), and then the lender allows you to close on a second loan for the remainder of the total sales price, which is anywhere from 5-8%. Which you choose is simply what works best for your loan scenario. The second loan is amortized over 20 years. In addition, the seller can pay up to 3% of your closing costs. This means a borrower can get into the home with little or no money down. Mortgage insurance and escrow for taxes and insurance are included in your monthly payment, but the mortgage insurance is issued at a reduced rate. And the other good news? You don’t have to be a first time homebuyer to qualify for this loan type. But if you are, you’ll be required to take a first time homebuyer class. So before you know it, badda bing, badda boom, you can begin the process of buying a home.

And guess what? There’s never been a better time to buy a home. Sales prices are fantastic and rates are fabulous. So, if you’ve been sitting on the fence, it may be time to hop off and take action. Call a lender and get pre-qualified. Homeownership is the American Dream, and here’s the opportunity to grab it!

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.


Adrian said...

So friends are there no possible ways to secure Grants for us. I believe these would make things easier for us in making the home construction as we need not think about repaying the amount. Some stories of confrontations while repaying loan amounts have made me rather skeptic of availing such loans.

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