Deciphering the stress of home loans…
PMI, FHA, USDA, MHDC, and VA are all initials you will see when you are looking into securing a home loan. If you are like I was 5 years ago when I was first considering purchasing a home, reading about home mortgages is like reading a foreign language that you have not studied. Unfortunately I did not have a good mortgage officer to help me wade through my options. Having a good lender is key! There are so many programs out there that can help you get your feet planted firmly inside of a home. I hope this post will make the world of loans sound like English instead of that foreign language.
This is the loan most people think they must qualify for to secure a home loan. In fact, many people out there think you must have a 20% down payment to secure this loan, and so when they are unable to do that they just assume they cannot purchase a home. In fact if you qualify for a conventional loan you can put down as little as 5%. You will have to carry private mortgage insurance (PMI), and that will be included into your mortgage payment. However, the good news is that the PMI will drop off as soon as you reach that 20%. Conventional is typically the way to go if you have the money for a good down payment and closing costs and your credit score qualifies you.
FHA (Federal Housing Administration) Program
The Federal Housing Administration insures FHA loans, which allows your lender to offer you a better deal. FHA loans allow a lower down payment (3.5% of purchase price), and typically a lower interest rate. You can qualify for this type of loan with a lower credit score than a conventional loan. The drawback to an FHA loan is that there is an FHA fee (upfront mortgage insurance premium), however that will be rolled into your mortgage. You also have to pay the private mortgage insurance (PMI) and you will pay that for the life of the loan (versus it falling off at 20% with a conventional loan). FHA is a great opportunity for you if you do not have as much money for a down payment, and if you have a lower credit score.
USDA Rural Development
Do you dream of owning a home on the outskirts of KC with a beautiful view for the gorgeous KC sunsets? If so, a USDA loan might be perfect for you! USDA loans are 100% financed and require zero down payment. However, the property you wish to buy must be located in a targeted area of KC and you must fall under the maximum income levels allowed for this loan. Click here for details on eligibility requirement and income guidelines.
Are you a Veteran or active military personnel in the Army, Navy, Marine Corps, Air Force, Coast Guard, National Guard or a surviving spouse of a Veteran? If so this may be the loan for you! You still must qualify with your credit score, but a VA loan allows a 0% down payment, no private mortgage insurance and there is no maximum loan amount. If you feel you qualify for this loan make sure you talk to your lender as this likely will be the best loan for you!
MHDC First Place Loan Program
The Missouri Housing Development Commission coordinates grants and low-cost loans for affordable housing in the state of Missouri. The First Place Loan Program gives first time homebuyers (defined as having not owned a home in at least three years) the chance to purchase. They offer both a Cash Assistance Payment (CAP) and a Non Cash Assistance Payment (Non CAP) option. CAP provides cash for down payment and closing costs. Non CAP provides a lower interest rate. There are income and maximum purchase price limits for the program. Interest rates are going to be higher than on other types of loans, and you will have to pay private mortgage insurance for the life of the loan. Visit MHDC for more information, and as always talk to your lender about this program!
Kansas Housing Assistance Program
Similar to the MHDC, the Kansas Housing Assistance Program is a statewide program that offers first time home buyers (again defined as within the last three years) up to 4% cash assistance on their down payment. There are income and purchase price guidelines. The interest rate is higher than on a conventional loan, or with the MHDC program. PMI will occur through the life of the loan. Visit the Kansas Housing Assistance Program for more information, and as always talk to your lender!
Home Partners of America
Do you find yourself in a position where you need to rent for another year or two, but you just cannot find a suitable rental house? Do you not want to move your family again in a year or two, but you just are not in the position to buy right now? Have you just moved to town and you do not want to commit to an area of town by purchasing until you become more familiar with the neighborhoods and school systems?
All of these reasons would be a great reason to use Home Partners of America to purchase your next house. How it works is that once you qualify (there is a $75 application fee and everyone over the age of 18 in the household must fill out the application and it takes about 48 hours to review your application) you find a home for sale that you would like to live in and eventually purchase with your real estate agent. Home Partners of America will then attempt to purchase that home for you. If successful, they will then turn around and lease the home back to you. You must sign a one year lease, and you will be treated just like a tenant would. However, at any time you can choose to exercise your right to purchase option and purchase the home from Home Partners of America. You can rent the home for up to 5 years, and your only commitment is the first year lease. If you decide the neighborhood or home is not for you, or your life situation changes, you can walk away after fulfilling those lease terms.