About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs

[Update — The Fed has been compressing mortgage interest rates on Fannie Mae, Freddie Mac, FHA, VA, and USDA mortgages for some time now. Due to those efforts and other market factors, interest rates most 15-30 year fixed government-backed mortgages remain quite low by historical standards. Contact us today to learn more.]

HOME PURCHASES

There are several government-backed home purchase programs designed to make it easier for Americans to buy a home, including programs from Fannie Mae, Freddie Mac, FHA, USDA, and the VA. The goal of these programs is to allow for low down payments and to make it easier for people with less than perfect credit to qualify for a mortgage. With mortgage interest rates still quite low and housing prices increasing across the country again, now is a terrific time to look into buying a home. Fill in the contact form on our home purchase programs page to learn more about the available government-backed purchase programs and perhaps to get pre-qualified for a home purchase loan.

HOME REFINANCES

For Homeowners Who Have Equity

There are several superb government-backed refinance programs for borrowers who have even a little equity in their homes and there are various good reasons to seek a refinance:

Contact us in the form in the sidebar to be pointed in the right direction on these refinance options.

For Homeowners Who Are Underwater Or Upside Down On Their Mortgage(s)

There are several options for the millions of U.S. homeowners who owe more on their home than the property is currently worth. Here are a few:

1. FHA Streamline Refinance — If you currently have an FHA loan, refinancing through the FHA streamline program is an excellent option. It is a low cost, low headache process designed to lower payments and interest rates. Fill in the contact form on this page if you have an FHA loan and would like to learn more about the FHA-to-FHA streamline program.

2. VA streamline (IRRRL) Program — For borrowers who have a VA loan now, the VA to VA streamline (also known as the IRRRL program) is a terrific, low cost way to significantly reduce payments and interest rates, even for borrowers who are underwater on their homes. If you have a VA loan contact us to learn more about the IRRRL program.

3. HARP Refinances — With President Obama’s HARP program, qualified homeowners can refinance a conventional first mortgage which is backed by Fannie Mae or Freddie Mac no matter how underwater they are. (See here to find out if your conventional mortgage is backed by Fannie or Freddie.) As long as the current Fannie or Freddie loan was started prior to May of 2009 there should be no loan-to-value (LTV) limits. Further, while the HARP 1.0 program did not work well for people currently paying mortgage insurance (PMI), the changes in the HARP 2.0 program allow borrowers with PMI to participate. The HARP program does not allow second mortgages to be combined with first mortgages but will allow the first mortgage to be refinanced with the second mortgage remaining in place as is (called a subordination). Contact us to learn more.

4. Loan Modification Programs — If you are unable to qualify for any other refinance program or if you are delinquent on your mortgage payments and are on the verge of foreclosing your best bet is often to seek a loan modification from your current lender. Loan modifications normally reduce mortgage payments by lowering interest rates or extending the loan period. Obama’s new “Home Affordable Modification Program” (HAMP) gives lenders incentive to modify troubled loans as well. See this page for strategies on seeking a loan modification.

Be sure to bookmark this site and check back for the latest updates on government-backed efforts focused on alleviating the housing crisis in the US (see stories below). To contact us about your options just fill in the contact form in the sidebar.

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LATEST GOVT-RELATED MORTGAGE NEWS:

Filed under Government Home Purchase Programs, Government Mortgage Financing Programs News

On occasion consumers will ask us “what is the optimal down payment amount for a home purchase?” The answer to that question depends on the circumstances of the borrower, but the following are some rules of thumb to follow:

25% down or more:

In some cases, such as when a borrower is selling a current home and buying a new home, borrowers will have more than 25% down. There are several advantages to having a larger down payment like this:

    – Lower loan amount means a lower monthly payment
    – Putting more than 20% down means no private mortgage insurance (PMI) required
    – At 25%+ down the interest rates tend to be the lower than with smaller down payments

20% down:

The benefits of 20% down mostly match the 25% down but rates tend to be a little higher with the 20% down option

10% down:

With 10% down borrowers normally are required to include PMI in the monthly payment (except with VA loans). The rates tend to be pretty similar or even sometimes slightly better than the 20% down option because the PMI reduces the risk to the loan investors. The other advantage of 10% down is buyers are allowed to get up to 6% seller concessions with Fannie Mae and Freddie Mac conventional loans. With less than 10% down the maximum seller concession amount for Fannie/Freddie loans is 3%.

5% down:

With 5% down all of the government-backed loan programs are still available (assuming a primary residence purchase). PMI is required and the lower the down payment on Fannie/Freddie loans, the higher PMI rate. But this is a good option for many families

3.5% down:

The FHA requires a 3.5% down payment. The FHA program remains the most popular loan program for first time home buyers due in part to its lower down payment requirement, and in part due to its leniency with credit issue. FHA tends to have marginally lower rates than conventional loans too. The primary drawbacks of the FHA programs (compared to a 5% down Fannie/Freddie loan) are that the FHA requires a non-trivial up front fee that is rolled into the loan and the monthly PMI on an FHA loan lasts all 30 years rather than dropping off when you get to 20% equity as with Fannie/Freddie loans.

0% down:

For borrowers who want to do zero down payment the options become more limited and more costly. The USDA and VA programs allow for no money down but both come with restrictions and caveats that exclude a large portion of borrowers (see here for more on that). You’ll often see advertisements from lenders for no money down programs but these “down payment assistance programs” programs are usually just FHA loans with assistance with the 3.5% down and they invariably come at a cost — usually in the form of much higher interest rates and higher fees. The problem with that is they can cost you much more in the long term.

What’s the best bet for those struggling with a down payment?

For borrowers struggling to come up with a down payment, and who are not good candidates for the USDA or VA mortgage programs, the best bet is normally to figure out a way to come up with at least 3.5% down on their own — either through their own savings or from family member help. By coming up with 3.5% to 5% down on your own you get the benefits of an FHA or Fannie/Freddie loan without having the burdensome extra costs and significantly higher interest rates that are associated with these so-called “grant programs” or other down payment assistance.

For more information contact us today on our home purchase page.

Comments (0) Posted on Thursday, October 25th, 2018


Filed under Government Home Purchase Programs, Government Mortgage Financing Programs News

People often come to us wondering “how much house” they can afford. This is a somewhat complicated question because there are many variables that contribute to that answer. In this post we’ll try to break those variables down and give some rule-of-thumb ballpark numbers.

Variables that go into equation:

Debt-to-income ratios: Normally borrowers want to have all of their monthly debt payments be less than 50% of their gross monthly income. So if a family makes $4000/mo gross, all of their monthly debt payments should be less than $2000/mo. So in this example if the non-housing bills (car payments, credit card minimum payments, student loan payments, etc) add up to $800/mo then the total mortgage payment (including property taxes, homeowners insurance, PMI, and HOA fees) should be under $1200/mo.

Principal and interest payment: This is the easiest and least variable part of the equation. Any calculator that has time value of money (TVM) function can help you figure this out. For instance, a 30 year fixed $150,000 mortgage at 4.5% will always have a monthly principal and interest payment of $760.03/mo.

Escrow payment: Here’s where costs can vary widely between locations. The things that can be included in the escrow payment (and debt-to-income ratio requirements) are as follows.

    Property (and other) taxes: In many states this is a single annual tax divided by 12 for the escrow. However in some states and counties property taxes are divided into sections including things like “school taxes” etc. Whatever the annual total is on all taxes on the property is divided by 12 and added to the debt-to-income ratio calculation.

    Homeowners (and flood) insurance: Again the cost of homeowners insurance can vary widely by region. For instance in areas prone to hurricanes or tornadoes, homeowners insurance can be significantly higher than average. Also if the home is in a flood zone expect higher annual premiums. Again, divide the monthly insurance costs by 12 when calculating debt to income ratios.

    Mortgage insurance (also known as PMI or MI): In most cases when you have less than a 20% down payment you will have to include mortgage insurance in your monthly payment. Mortgage insurance insures the lender against default on the loan. It is sometimes called “private mortgage insurance”, thus the popular PMI acronym. The amount of MI required depends on the loan type and on the size of the down payment. VA loans require no MI. USDA loans have something similar to MI rolled into the payments that is 0.35% of the loan amount spread out over 12 payments per year. FHA loans have MI that 0.85% of the loan amount spread over 12 payments per year. Conventional Fannie/Freddie loans have varying mortgage insurance amounts based on down payment amount and on credit scores.

    Homeowners association (HOA) fees: These are not usually included in the actual mortgage payment but they are included in the debt-to-income ratio calculation. Most condos and townhouses will have HOA fees and some single family homes have them too, depending on the neighborhood.

 
Rough ballpark numbers to expect

Because there is so much variability in the escrow items it is impossible to nail down costs nationwide. But here are some rule-of-thumb ballparks that can help triangulate a number to expect up front:

Total monthly payment Approx loan amount
~$1000 $120k-140k
~$1300 $165k-180k
~$1600 $205k-230k
~$2000 $260k-$290k
~$2500 $380k-410k

Again, it is very important to look at all of the variables when determining how much you can qualify for when it comes to a house payment. The other thing to consider is how much you can comfortably afford to pay every month — just because you can make the ratios work on a larger loan on paper doesn’t mean you are comfortable with the higher monthly payments in practice.

 
Contact us for detailed analysis of your situation

Contact us today at our home purchase page and we can connect you with a lender that is authorized to administer government-backed mortgages. They can run all your numbers for you and help you figure out how much you can qualify for and what your best bet is in terms of available programs.
 
 

Comments (0) Posted on Sunday, February 4th, 2018


Filed under Government Mortgage Financing Programs News

The Federal Housing Finance Agency (FHFA) recently announced that the maximum loan limits on Fannie Mae, Freddie Mac, and FHA mortgages are increasing in 2018. Starting this month the loan limits on Fannie and Freddie loans increased to $453,100 for single family homes in every county in America, and in counties designated as “high cost” the loan limit is $679,650. This increase helps adjust for inflation and the rising costs of homes throughout the country. See the Fannie Mae announcement here.

The FHA also announced an increase in loan limits across the country. Whereas the previous loan limit in non “higher cost” counties was close to $271,000 before, the new limit in those counties is $294,515. And in many counties the loan limits are higher based on cost of living. See here to check current FHA and Fannie/Freddie loan limits by county.

This all means it will be easier to get government-backed loans in counties where housing prices have risen. Contact us to learn more about qualifying.

Comments (0) Posted on Tuesday, January 30th, 2018


Filed under Government Mortgage Financing Programs News, HARP Program Loans or The Obama Refinance Program

Several weeks ago the Federal Housing Finance Agency (FHFA) announced that the HARP program would be extended through the end of 2018. In addition, a new program designed to allow borrowers to refinance even if they have little to no equity in their home was announced. This new program looks as if it will function as a successor to the HARP program in the years to come. See more details below and contact us today for more information or an estimate on a government-backed mortgage.

The Federal Housing Finance Agency (FHFA) has announced that the Home Affordable Refinance Program® (HARP®) will be extended to Dec. 31, 2018, continuing to provide liquidity to support eligible borrowers.

In addition, Fannie Mae and Freddie Mac will introduce new high loan-to-value (LTV) ratio same-investor refinance options for loans with note dates on or after Oct. 1, 2017, with a 15-month seasoning requirement. The high LTV refinance option will provide refinance opportunities to borrowers with existing Fannie Mae or Freddie Mac mortgages who are making their mortgage payments on time but whose LTV ratio for a new mortgage exceeds the maximum allowed for standard refinance products.

Under the new option, as with HARP, the refinance must provide a borrower benefit, such as a lower interest rate. Unlike HARP, the new option will not have an expiration date.

Comments (0) Posted on Sunday, October 15th, 2017


Filed under Government Home Purchase Programs, Government Mortgage Financing Programs News

After the general election in November of 2016 mortgage interest rates spiked significantly higher than they had been the weeks and months prior to the election. Since then rates have not returned back to the low levels we saw in the summer of 2016 but they have eased back a bit from the peaks we got in December of 2016. While rates are not currently at all time lows, mortgage interest rates remain at least near 50 year lows compared to long term averages. And with housing values rising steadily in most parts of the country, buying a home is looking like a wise financial decision for more and more American families. The summer housing rush is coming to an end soon but there are often excellent housing deals to be had in the fall months. Contact us today to see about getting pre-qualified for a government-backed mortgage.

Comments (0) Posted on Wednesday, August 16th, 2017


Filed under Government Home Purchase Programs

While the USDA and VA mortgage programs require zero down payment when purchasing a home, the two most popular government-backed mortgage programs, FHA and Fannie Mae/Freddie Mac, do require down payments. The minimum FHA down payment amount is 3.5% of the purchase price and in most cases you need 5% of the purchase price as a down payment for Fannie/Freddie loans. Because many families have trouble saving up 3.5-5.0% of the purchase prices, there are down payment assistance (DPA) programs that have popped up all over the country.

Not Federal Programs

There is no DPA program sponsored by the federal government that works throughout the country. Rather all current government-backed DPA programs are sponsored by either city, county, or state governments. Because of this, there are no uniform rules when it comes to DPA programs — the availability and terms of DPA programs depend on the city, county, or state you live in.

DPA programs are usually not free

In the vast majority of cases, DPA programs are not “free money”. Rather, it is common for the programs to pay for themselves by charging significantly higher interest rates than the rates one would get by coming up with a down payment on one’s own (through savings or help from family). The problem with significantly higher interest rates is it could cost a borrower vastly more in interest paid over the life of the loan than the DPA money they are getting up front. In addition to higher interest rates, some DPA programs also charge up front fees that roll into the new loan. In addition, some DPA programs are just additional loans that need to be paid back rather than forgivable grants.

Because of these things, it is extremely important for borrowers to ask a lot of questions before diving into a local DPA program.

Alternatives to DPA programs

First, there are the USDA and VA mortgage programs to check out. Second, in many cases borrowers who are looking at FHA or Fannie/Freddie loans would be better off saving up a little longer or getting gift funds from family/friends to cover the down payment rather than use the local DPA program. Gifts from family are acceptable sources of down payment money (even if one intends to pay the gifter back eventually). If avoiding a DPA program means getting a significantly lower interest rate, the extra effort often pays off in the long run.

Contact us on our home purchase page to learn more or to get directed to a lender who could help you get pre-qualified for a home purchase loan.

Comments (0) Posted on Friday, April 28th, 2017


Filed under Government Home Purchase Programs

As we discuss on our home purchase page, there are several government-backed home purchase programs available. The main categories of programs are Fannie/Freddie loans, FHA loans, VA loans, and USDA rural housing loans. Each has advantages and disadvantages. Below is a list of some pluses and minuses of each program.

Fannie/Freddie loans

+ No up front fees
+ No PMI when you have more than 20% equity

– Requires at least 5% down payment
– Normally requires good credit scores and history

FHA loans

+ Only requires 3.5% down payment
+ Much more lenient on credit scores and past credit problems

– Has a 1.75% up front fee that rolls into loan
– Requires monthly PMI fee for the life of the loan

VA loans

+ Zero down payment required
+ No PMI

– Must have military experience to be VA eligible
– Charges up front fee of at least 2.25% of loan (unless borrower has disabled status)

USDA Rural Housing loans

+ Zero down payment required
+ Much smaller upfront fee and ongoing pmi-like fee than FHA

– Only applicable in areas deemed “rural” by USDA
– Requires good credit scores and history
– Has upper income limits — borrowers who make too much not eligible

All of these programs are excellent overall. It’s mostly a matter of which program fits best. Contact us today at our home purchase page to learn more about which program fits best for you and to get pre-qualified for a home purchase loan.

Comments (1) Posted on Saturday, March 11th, 2017


Filed under Government Mortgage Financing Programs News

In January of 2017 the FHA announced that it would be reducing its ongoing mortgage insurance fees for 85 basis points per year to 60 basis points per year. While not an earth-shattering change, it would have been a nice reduction in the pmi rates for new FHA borrowers. The change was scheduled to go take effect on January 28. Upon entering office, the Trump administration put a hold on all pending changes. As a result, the reduction of FHA pmi is currently, and possibly permanently on hold. Time will tell how the new administration will deal with government-backed mortgage programs over the next four years. So far, no major changes — just this one minor change in plans.

Comments (0) Posted on Saturday, February 18th, 2017


Filed under Government Mortgage Financing Programs News

For many years the maximum loan amount for a conforming (Fannie/Freddie) mortgage has been set at $417,000 except in counties designated at “high-cost” counties. Starting in January of 2017 that limit has finally been increased to at least $424,100 in every county in America. The limits are higher than that in high-cost counties still too. Likewise, the maximum loan amount for FHA loans in non high-cost counties has been increase nationwide from $271,050 to $275,665. The loan limit changes aren’t earth-shattering, but they will be helpful to borrowers who are getting loans right near the limits. See here for the loan limits in every county in America.

Contact us today to learn more about available government-backed home purchase and refinance programs.

Comments (1) Posted on Thursday, December 8th, 2016


Filed under Government Mortgage Financing Programs News

As we reported last spring, the USDA Rural Housing program will be significantly improving its terms starting in October of 2016. Here is an excerpt of the announcement from the USDA:

Upfront Guarantee Fee and Annual Fee Reduction for Fiscal Year (FY) 2017

This message provides advance notice of the upfront guarantee fee and annual fee structure that will be effective for Single Family Housing Guaranteed Loan Program (SFHGLP) loans in fiscal year (FY) 2017, which begins October 1, 2016 and ends at the close of business on September 30, 2017. The upfront guarantee fee will change from 2.75% to 1.0% of the loan amount. The annual fee will change from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan.

Please refer to the unnumbered letter (UL), “Upfront Guarantee Fee and Annual Fee for Fiscal Year 2017,” for additional details.

In short, the fee to get started on a USDA loan will be cut by more than 60% and the only ongoing monthly USDA fees will be cut but 30%. All of that makes the USDA Rural Housing program even more useful. The USDA Rural Housing program is great for folks willing to buy a home away from urban areas and who don’t make more than about $80-90k per year as a household. The rates are low on USDA loans and USDA home purchase loans require $0 down. For a map of eligible areas see here.

Contact us today for more info on the USDA Rural Housing mortgage program.

Comments (0) Posted on Friday, September 9th, 2016


Filed under Government Mortgage Financing Programs News

The world financial markets did not take last week’s British vote to leave the European Union well. Stock markets all over the world tumbled Friday and Monday as the shock waves of the so-called Brexit vote reverberated around the world. The immediate result was investors fleeing stocks and racing to the relative safety of bonds. That rush to buy bonds pushed the yield on the 10 year T-Note lower, and as usual, mortgage interest rates mirrored that move lower. Mortgage interest rates dropped between 1/8 and 1/4 percent between Thursday and Monday. Rates have remained lower so far this week but with a rebound in the US stock markets on Wednesday we’ll see where rates end up for the rest of the month.

The takeaway from this is that now is an excellent time to research a mortgage refinance or a home purchase. Rates are near historic lows and there are several government-backed mortgage programs available. Contact in the sidebar for guidance regarding refinances or on our home purchase page for assistance qualifying for a home purchase loan.

Comments (0) Posted on Wednesday, June 29th, 2016


Filed under Government Mortgage Financing Programs News

In the wake of the 2007 housing bubble bursting, adjustable rate mortgages (ARMs) got somewhat of a bad rap. The problem in the early 2000’s was too many borrowers were purchasing homes with ARMs without understanding how they work. The result was their ARMs began adjusting higher years down the road and unprepared borrowers found themselves unable to make their payments. But ARMs can be very useful loans when understood and utilized properly.

Paying a premium for 30 years mortgages

While 30 year mortgages are currently the most popular form of mortgage, they come at a cost. There is a premium, in the form of a higher interest rate, to be paid for the guarantee of keeping a rate fixed for 30 years. For homeowners who keep their mortgage a over the course of decades, that premium is well worth the security of a long term fixed rate. But the reality is that most people sell their home or refinance within 5 years of getting their mortgage. So most folks get a higher rate for the right to have a fixed rate for 30 years but then end up selling or refinancing a couple of years later anyway.

Who should get an ARM?

Folks who feel fairly confident they will sell their home in the next 5-10 years are excellent candidates for ARM mortgages. Rates on ARMs are significantly lower than rates on 30 year mortgages so refinancing to an ARM (or purchasing a home with an ARM) can lead to huge interest savings.

Contact us to get a quote on a government-backed ARM loan

If you think there is a good chance you’ll sell your home in the next 10 years contact us today to get an estimate on a refinance to an ARM. Rates on ARM lows are surprisingly low and a refi to an ARM could save you a ton of money over the next few years before you sell your home.

Comments (0) Posted on Tuesday, June 21st, 2016