We have all heard the commercials for some of the lending programs that make it sound like you can purchase 1 day after a short sale, bankruptcy or foreclosure (true if you were never late on your mortgage). There are also the ones about reverse mortgages that are prevalent in everyday advertising. I am going to outline a couple of mortgage programs that I have found that fit some peoples needs and since I do not sell mortgages you can be assured the advice will be straight forward.
FHA Back to Work Program.
This program is especially designed for potential homeowners who have had a tramatic economic event such as bankruptcy, foreclosure, job loss or short sale. The parameters of this program allow a person to purchase a home under FHA guidelines with the following criteria once the event is more than one year old.
1. It must be demonstrated that the borrowers income decreased by more than 20% for at least 6 months due to the economic event.
2. It must be demonstrated that the likelihood of the event repeating itself is unlikely.
3. The potential borrower must complete home ownership counseling a MINIIMUM of 30 days prior to the loan application.
4. Recovery from the Economic Event is defined as reestablishing satisfactory credit for a minimum of 12 months.
This means that under a variety of circumstances a borrower can purchase a home 12 months after a significant economic event subject to the same guidelines for income and credit. This program may be very helpful to the many thousands of people who sustained a job loss or short sales in the past 6 years without having to wait for the preivous limit of 3 years on FHA or 4 years on conventional loans.
1/2 Percent Down Payment
FHA Down Payment Assistance
FHA also has a new program that allows properties in Arizona, New Mexico and Nevada that allow a borrower to borrow 99.5% of the value of a home in a purchase transaction. This program provides for a standard FHA loan plus a 3% second for a total down payment for the buyer of only 1/2 of one percent. The obstacle for many buyers is the down payment. On a $200,000 home purchase the standard FHA buyer would have to have $7,000 down payment whereas this program on the same purchase amount would only require a down payment of $1,000. This program also has a home ownership counseling program
5% Down-No Mortgage Insurance Conventional
If you do not fall into either of those categories, one of the best mortgages out there is this program. It features a slightly higher down payment and credit score than FHA and an interest rate approximately 3/4% higher than FHA loans but this is more than offset by the lack of mortgage insurance which is very significant versus an FHA mortgage. Taking into account the higher rate and down payment, borrowers still end up with a much lower payment amount versus an FHA. Since FHA mortgage insurance remains for the life of the loan, this is generally the best option for most mainstream borrowers.
Why now?
Despite our little slow down for the past couple months, everything indicates that our market is going to continue to appreciate over the next few years. If you have been sitting on the sidelines or a considering a move-up, here is the logic behind making a move now.
If you don’t own a home, then you don’t have your chips in the game so to speak. If the market does take a big jump in the next year, you will miss it. By the time you see it on the news or hear about it from a friend most of the significant appreciation will already be over. Either make a move now or pay close attention to my market reports.
If you are planning a move up and the home you are planning to purchase is more expensive than the one you currently own, as they appreciate, you will lose or miss the appreciation on the difference in their values. The market is great for upper end buyers right now and still good enough for mid range sellers making it a perfect time to make that step up move.