Government insured mortgages are very popular financing options as it serves the best interests of home buyers while assuring lenders of safe business. First time home buyers with limited financial resources would like to depend on this type of loans that can make home buying easy for them. Buyers must choose from different types of government insured mortgages like FHA loans, VA loans and USDA loans which means it needs some good understanding about the various facets of loans to match with the budget of individuals. The latest version of Karl’s mortgage calculator that is available online is a handy tool for analyzing the loan elements of different types of mortgage loans to get a clear picture of the loan.
Shopping for mortgage loans become easy when you have a ready calculator to try out various loan options for finding out which combination of the loan elements like interest, loan term and loan amount together with down payment works best for you. Searching for various home loans will help you discover many options beyond the conventional mortgage loans as you would find multiple home buyer programs and grants that can help to realize your dreams of owning a home. Since the house is the largest investment of your lifetime, it is worth spending the time to find out the most convenient mortgage options that fit your budget.
In this article, we will discuss 6 home buyer programs and grants that will expand your choices.
The good neighbor next door program
The US Department of Housing and Urban Development or HUD sponsors the Good Neighbor Next Door Program for providing housing to a specific section of the population. The program covers firefighters, law enforcement officers, teachers from pre-kindergarten through 12th grade and emergency medical technicians – the group that keeps communities well educated and safe.
Homes in specially marked areas known as ‘revitalization areas’ are available under the program that allows home buyers to get a maximum discount of 50% on the listed selling price. You can search for properties in your state by logging on to the program’s website but must commit living in the home for 36 months to qualify for the program that offers homes on as-is-where-is basis without any warranty for buyers.
You can couple the program with any conventional financing like FHA, VA or cash and can sell the home for profits after fulfilling the condition of living for 36 months.
Freddie Mac or Fannie Mae
Freddie Mac and Fannie Mae are government sponsored entities that help to strengthen the mortgage market in the US. The government sponsored enterprises or GSEs are responsible for setting and borrowing guidelines for home loans they intend to buy from conventional lenders who operate in the secondary mortgage market. Having a good financial track record without an unblemished credit history and a minimum credit score of 620 are the eligibility criteria for both programs that entail down payment of 3% only. In some cases, Fannie Mae accepts debt-to-income ratio as high as 50%, but as you are putting not more than 20% down payment, you must pay for PMI too. However, you can obtain PMI waiver once your loan-to-value ratio drops below 80 percent. The loans are available according to the limits set by the government.
HomePath Ready buyer program offered by Fannie Mae
This not so well known initiative aims at first time home buyers interested to buy foreclosed homes belonging to Fannie Mae. To qualify for the loan, it is mandatory for prospective buyers to take an online home buying education course that can help to receive loan assistance not exceeding 3% in closing cost toward the purchase of the home. The scheme is relatively unknown due to its specific application for foreclosed homes that constitute a miniscule percentage of real estate and finding a suitable property in this category can be quite challenging. First time buyers with limited finances would find the program beneficial provided they are interested in foreclosed homes.
Energy Efficient Mortgage
Doing some good for the environment would also be good for your pocket when you set out to buy a home. Energy efficient homes mean lower utility bills besides helping to lower the carbon footprint on the environment. Despite spending some good money to create energy efficient or greenhouse, you could gain by availing energy-efficient mortgage (EEM) loan, which is an insured loan just like VA or FHA loan. You can offset the cost of energy efficient upgrades like installing double paned windows, more efficient HVAC, improved insulation, etc. done to your home against the primary loan upfront but without a larger down payment. Adding the improvements with minimal down payment and reaping the cost benefits in the long term are the attractions of the EEM program.
Local first time home buyer program and grants
Many states and cities offer first-time home buyer grants and programs to attract home buyers. The financial assistance is available in the form of grants that do not need repayment and low interest or interest free loans with deferred payment to cover the closing costs or down payment. However, some programs have income limits, and you must check it first before planning to avail the scheme. If you sell the house, you must repay the loan in some cases.
Native American Direct Loan
Eligible Native American veterans can avail loans under the program not only to buy a home on federal trust land but also to improve an existing home. This loan is like VA loans but with the difference that VA is the mortgage lender in this case. The loan does not require any insurance cover, PMI or down payment and comes with low closing costs. Borrowers have to bear a minimal funding fee amounting to 1.25% payable to VA, and the interest rate is about 4.75% but subject to change.
However, the choice of property is quite limited, and the maximum loan amount varies according to the area where the property is located.
If you are really interested in looking beyond conventional mortgage financing home as a home buyer, these are more options you can actually evaluate.