About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under Government Mortgage Financing Programs News

Jessica Anderson of Kiplinger recently wrote an article on how loans are still out there to be found via the FHA and VA programs. Here is an excerpt:

Richard Khoe used to wonder how he could ever afford to buy a home of his own. Coming up with a down payment in the ever-escalating Washington, D.C., market seemed like a pipe dream.

But last February, after years of living in a studio apartment, the 36-year-old public-policy researcher finally saved enough to buy a three-bedroom rowhouse in D.C.’s gentrifying Columbia Heights neighborhood. He had 5% of the purchase price, and his parents kicked in an equal amount so he could make a 10% down payment.

Timing was key for Khoe. The seller had reduced the price from $560,000 to $460,000 as the market dipped. And because the owner hadn’t updated the appliances — or the flowered wallpaper in the bathroom — she accepted an offer of $426,000, with a $5,000 credit for repairs. “Everything was old, but it was in good condition,” says Khoe. “So I didn’t have to spend more money right away to make the place livable.”

The new deal

The housing boom made it easier for all buyers to qualify for a mortgage. In fact, over the past five years, four in ten buyers were first-timers, with a median age of 32. But now there are fewer sources of credit, so lenders are tightening up.

For example, borrowers applying for an adjustable-rate mortgage will have to qualify for the fully indexed interest rate, not the initial teaser rate. And 100% financing deals are drying up. “The whole market is in a panic right now,” says Jim McMillan, a senior loan officer with JP Mortgage/JPMorgan Chase. Until the subprime mess gets sorted out, he says, larger institutions are staying away from any loan except 30-year fixed-rate mortgages with 20% down.

First-timers with credit dings are among the hardest hit. One alternative for them is a program that fell into disuse in the easy-credit days: the Federal Housing Administration loan. You apply for the loan at a private lender, but the FHA insures the loan against default. You generally pay a 3% down payment-money that can come from a gift-plus mortgage insurance premiums. Veterans who want to put zero down can turn to VA loans.

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