I was watching Good Morning America, earlier this week and Melody Hobson did a spot on mortgageshttp://abcnews.go.com/GMA/video/homeowners-fall-mortgage-payments-11426728, specifically Fannie Mae and Freddie Mac. Here is a short synopsis: “The good news is the interest rates are very, very low. The bad news is that you can’t get a loan unless your credit score is 730 and you have 20% down”. If I was looking to buy a house and couldn’t meet those criteria, I would have thought “I can’t buy a house”. The problem is that she missed more than 50% of the market – the Government loans - FHA, VA, and Rural Development. In some areas, FHA and RD (rural development) loans make up more than 70% of the loans. Let’s look at these three loans:
FHA – 3 ½% down payment, seller can pay upto 6% of the buyers’ closing costs, a credit score over 620, more lenient debt to income ratios http://www.hud.gov/buying/loans.cfm. Those homes must meet certain criteria, determined by an approved FHA appraiser. Those required repairs are typically safety issues, broken windows, peeling paint, the roof and furnace must be determined to last at least 3 years, any steps over 3 must have a hand rail. Any other required repairs would be determined by the FHA appraiser. There are maximum loan limits (area specific) for FHA loans. There are also two loans available with FHA for homes that need repair– the 203K Standard Renovation Loan and the 203K Streamline Renovation loan. They allow those repairs to be rolled into one loan. Conventional loans to initially buy a home do not allow for additional monies for repairs.
VA – Veterans Administration loans for those that have served us in the militaryhttp://www.benefits.va.gov/homeloans/. The highlights are “0” down payment, closing costs can be paid by the seller or rolled into the loan, interest rates that are lower than a conventional loan. They also have a minimum standard that the house must meet similar to the FHA loans.
Rural Development (RD) – also a “0” down payment loan, a credit score over 620, upto 6% closing costs that can be paid by the seller or rolled into the loan http://www.rurdev.usda.gov/Home.html. This loan also has a minimum standard that the house must meet similar to the FHA loans. There are income limits with this loan. RD loans are restricted to those areas that are considered rural. These loans are funded by the government for a specific time frame and when those monies run out, they can’t be funded until the next funding date. I work with a mortgage company that (when this happens) holds the loan until the government funds are available and then funds it thru Rural Development.
To summarize: there ARE loans available for a large portion of the population, there is a 9 month inventory of homes available for sale, and home prices are down an average of 25% or more in many areas. There are loans available for those homes that need renovation or remodeling. You can buy more home, with some of the lowest interest rates in years, with a little or no down payment.
IT IS A GREAT TIME TO BUY A HOME!!!