Every Monday Morning at 8:15am, join me on my Facebook page as I sit down with a local lender, and do a live interview and talk about a Mortgage Tip that may help YOU with your next Real Estate Purchase.
This morning I sat down with Barb Adelaine from BankStar. Today, she explained the different options home buyers have with low down payment loans. You can reach Barb at 605.696.8562 or firstname.lastname@example.org. Her office is located at 1301 6th St., Brookings SD 57006 or on the web at www.ebankstar.com
Low Down-Payment Loan Options
Good morning everybody, Shane here from the Brookings Home Team, powered by Century 21. 8:15 Monday mornin', that must mean it's Monday Morning Mortgage Tip. And I've got Barb sitting right next to me from Bank Star which is another good sign it's a Monday Morning Mortgage Tip. So we'll just get right into it Barb, thanks again for joining me,
- You bet. and have at it. What are we gonna talk about today?
- Today we're gonna talk about low down payment loans. I think everybody's struggling a little bit with down payment and closing cost. If you're not a first-time home-buyer sometimes that can be a challenge, or maybe one of a couple is the first time, and the other one had owned some land, or a house and that kind of goofs up their first time home-buyer possibilities. So we'll talk about a couple of options. FHA loans are kind of the standard go to. FHA is a government kind of mortgage insurance that insures the lender that if you don't pay back the lender will be able to come out whole. So it's not to be confused with homeowners insurance, but it's like mortgage insurance.
- FHA has a monthly premium that gets added to your monthly payment so that's like regular mortgage insurance. But they also have an upfront fee that's as much as 1.75% of your loan amount, and that can be added to your loan. So you're borrowing more money, but it actually is an extra expense. There's no income limitations on those, so you don't hit the first time home-buyer problems with being too rich. This is a good thing.
- Good thing, yeah.
- Being too rich. If you have parents that are helping and they're acting as co-signers on the loan, FHA is okay with that. And it is about the only loan left that is okay with that.
- A seller can contribute up to 6% of the sales price as a help for you, for the closing cost. And the credit score can go down to 620, that's their bottom.
- And then they have some requirements that the house has to meet. So when the appraisal is done, the appraiser is also looking for the FHA requirements for safety and soundness, they check things like handrails on stairways, and make sure all the plugs work and other things like that.
- Just like the typical government-backed loans.
- Rural developments are all basically the same thing.
- Yeah, they're all kind of the same. One of the downfalls of FHA is that HUD was in financial trouble a few years ago, and so they discontinued letting go of this mortgage insurance. So the amount that you pay monthly you'll pay monthly for the whole time you have this loan. So if this is a 30-year loan for 30 years, you're gonna pay that premium. So for some people an alternative would be a Fannie Mae 97, which is one I've used a whole lot. Fannie Mae of course is a one of the big private companies that's used when you're sold on the secondary market, your loan goes to the secondary market, they're the buyers of a lot of those. So all of the big companies US bank, all those big players on that level they're all going to Fannie Mae too. Or Freddie Mac, same thing. Those require a 3% down payment, your FHA loan require three and a half, so slightly less down. You have monthly mortgage insurance that may be a bit more than the FHA one, but you don't have that upfront chunk that gets added to your loan. So in that way, if you look at that combination, it's less expensive for the initial input. You don't have any at closing for mortgage insurance, it just starts when your monthly payments start. There's no income limitations on this one either, but at least one person needs to be a first time home-buyer, it could be a rich person home-buyer, that would be okay. They don't allow mom and dad or grandma and grandpa to co-sign to help, everybody who signs on the loan needs to live in the house.
- So non-occupant co-borrowers are not allowed. The maximum seller contribution on these is a little less at 3%, and the credit score is 640. So you have to put, you can only get little help from your seller which is kinda normal anyway, and a little better credit score at 640. This company doesn't care if you have owned another property because it's not affiliated with that first-time home buyer. And so there's no education required, you don't have to get a certificate like some of the other kinds of loans do, but we do suggest that you at least look at that online, anyway. Because you don't have very much into this loan, you're mostly borrowing the whole amount at 97, just putting that little 3% down, so it's good to know how to balance the budget, and some other things that they teach in those online courses for first time home-buyers. So to contrast again, the Fannie Mae 97 might be good for you if you have 3% down, and you don't want to get into a government program where you're never going to be able to get out of mortgage insurance. About 10 years is average when you've paid down enough on a Fannie 97 to have it release and then your house payment goes down you don't have mortgage insurance anymore. So a couple of options.
- Lots more low income, or low down payment. One of my personal favorites outside of that is for Veterans, if someone has had military service and they can get a certificate of eligibility for their house, they are not required to have a down payment at all. And we love doing those, do those all day long. So in those options if you know someone who's struggling getting a down payment put together, and they've had military service, we will find their certificate for 'em, for free. so they're welcome to come in pre-approve, we'll help them get their certificate and go from there.
- A lot of information today guys, so a lot of numbers a lot of options, best thing to do: come in and talk to Barb, she'll be happy to go over that a lot more in detail with you, and see what you qualify for. Put you in exactly where you need to be with the right type of loan, so just come in and talk with her. As usual information for her will be on the top, on the bottom, on the sides, wherever your device allows you to see it. So feel free to reach out to her, or if you have a question for myself I'll get that over to her as well. So that concludes this week's Monday Morning Mortgage Tip, a little longer than normal, but really great information. Feel free to share and tag anybody else you think would benefit from this video as well. We'll be back next Monday for our next tip for you. Thanks again for watching, have a great week guys, see ya!