Buying a New Home

First Time Home Buyers

One of the oldest and most popular first-time homebuyer programs is financing through FHA (Federal Housing Administration), or VA (Veteran’s Affairs). These loans are insured by the government.  Note: you do NOT have to be a first-time homebuyer to qualify for an FHA loan. You DO need VA eligibility to qualify for a VA loan, whether this is your first home or subsequent home.  While both FHA and VA offer Adjustable Rate Mortgages, the majority of these loans originated today are 30-year fixed.  The rates are low, the qualifying criteria is expanded and in both instances, some form of mortgage insurance is required.

Federal Housing Administration (FHA)

FHA requires 3.50% down payment, which can be in the form of a gift or borrower’s own funds.  Some down payment assistance programs may be available in your area.  The seller can pay most, if not all, of the buyer’s closing costs.  Most lenders require a minimum credit score of 640 for an FHA loan, however some lenders still offer FHA financing for lower credit scores or no credit score (no established credit).  FHA guarantees the loan on behalf of the lender.  In order to fund the program, FHA requires an up-front Mortgage Insurance Premium (“MIP”), which can be financed, and also collects a monthly insurance payment from the borrower as well.  The monthly insurance is collected until the loan balance equals 78% loan-to-value (“l.t.v.”).  The upfront premiums, and monthly payments, vary according to l.t.v., purchase or refinance and term of loan (15 or 30 years).  There are no prepayment penalties on FHA loans.  Both Adjustable Rate Mortgages and Fixed-rate loans are available through FHA.  FHA also offers financing for limited repairs to a home to be purchased.  Referred to as the 203k program, the loan provides financing for the purchase and up to $35,000 in certain repairs.  The maximum FHA loan amount, in Maricopa County, is $346,250.

Veterans Affairs (VA)

VA offers 100% financing, with no down payment required, no monthly Mortgage Insurance and no minimum credit score.  A “funding fee” is charged on all loans, regardless of loan-to-value (‘l.t.v’).  The funding fee varies depending upon the transaction type (purchase vs. refinance), duty status, l.t.v. and whether the veteran is using his/her entitlement for the first time or for subsequent use.  The funding fee can be financed (added to the amount borrowed).  The funding fee is paid to the VA to cover the cost of the VA program and to replenish the insurance fund.  Note:  the funding fee is waived if the veteran borrower is currently receiving VA compensation for a service-related disability. The maximum VA loan amount is $417,000 in most areas.  Some lenders offer “jumbo” VA loans in excess of this amount.  VA offers financing for primary residences only (is not available on vacation homes or investment properties).  VA mandates the type and amount of closing costs that the veteran can pay.  The seller is required to pay certain costs on behalf of the veteran borrower.  The seller can pay most, if not all, of the buyer’s closing costs if negotiated accordingly in the purchase contract.  There are no prepayment penalties on VA loans.  Both Adjustable Rate Mortgages and Fixed-rate loans are available through VA.

USDA/Rural Housing Loans

This program is administered by USDA Rural Development.  The subject home must be located in rural areas, which include open country and places with a population of 10,000 or less and under certain conditions, towns and cities with 10,000-25,000 residents.  The loans may be for up to 100% loan-to-value (102% with the guarantee fee included).  Loans may include funds for closing costs, the guarantee fee, title services and other prepaid items, if the appraised value is higher than sales price.  No down payment is required.  The loans are 30-year fixed, at market rates, and are fully amortizing (no “negative” amortization and no prepayment penalties).  Buyers must occupy the property as a primary residence.  Income and property restrictions apply.  Eligibility can be determined at http://eligibility.sc.egov.usda.gov. The maximum loan amount in Maricopa County is $417,000.

Fannie Mae Home Path:

The Home Path program is specifically designed for buyers purchasing an REO (real estate owned) directly by Fannie Mae. Fully amortizing, fixed-rate loans are available up to 95% loan-to-value for primary residents and 90% loan-to-value for second home users and investors.  There is NO private mortgage insurance required.  An appraisal is NOT required; the loan-to-value is based on the purchase price. Borrowers are subject to standard credit qualifications and the property must be designated as a Fannie Mae owned home, as registered at www.homepath.com.  Interest-only payment features are also available on these loans.  The maximum loan amount in Maricopa County is $417,000.

Standard Conventional loans:

Typically, today’s conventional loans (non-FHA, non-VA or other) are originated by banks and mortgage companies, which are in turn, sold to FNMA/Freddie Mac).  The maximum amount of financing, in Maricopa County, is 95%, with Private Mortgage Insurance (“PMI”) required and subject to approval by both the lender and the PMI insurers.  These loans include Adjustable Rate Mortgages and Fixed-rate mortgages.  In some instances, interest-only payment features may be available.  The maximum loan amount in Maricopa County is $417,000.

Business Real Estate Financing:

Small Business Administration, Commercial loans and equity lines are available to the business owner looking to buy or refinance a commercial property.  Please call to discuss individual needs:  480-699-4075.