LOAN PROGRAMS
A conventional mortgage is a home loan made through a private lender. Compared to governemt loans, it can also require a higher credit score to qualify.
Conventional loans are not secured by a government entity. Instead, these mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. However, some conventional mortgages can be guaranteed by the two government-sponsored enterprises (GSEs): the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac). In most of the continental United States, a conventional loan must not exceed $647,200 in 2022 (up from $548,250 in 2021).
Conventional Loan Options:
- Up to 95% Loan-to-Value (for qualified buyers)
- No Private Mortgage Insurance if Loan-to-Value is <80%
- Can finance Bardominiums and condos
- Refinancing - Cash out, Rate/Term and Construction to Permanent
Key Takeaways:
- A conventional mortgage or conventional loan is a homebuyer’s loan that is not offered or secured by a government entity.
- It is available through or guaranteed by a private lender or the two government-sponsored enterprises (GSEs): Fannie Mae and Freddie Mac.
- Potential borrowers need to complete an official mortgage application and supply required documents, their credit history, and current credit score.
- Conventional loan interest rates tend to be higher than those of government-backed mortgages, such as Federal Housing Administration (FHA) loans.
The government loan options offered by Guaranty Bank and Trust are FHA, USDA and VA. While each program has it's own specific critera, they are all guaranteed by the federal government.
FHA
A Federal Housing Administration (FHA) loan is a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than is usually required. The FHA loan is designed to help low- to moderate-income families attain homeownership. They are particularly popular with first-time homebuyers.
FHA Loan Options:
- Purchase
- Rate/Term Refinance
- Simple Refinance
- Streamline Refinance
- Cash out Refinance
USDA
The U.S. Department of Agriculture (USDA) home loans program offers mortgages to low-income residents of rural areas who cannot otherwise obtain a conventional mortgage. If you live in a rural area and can't qualify for a conventional loan, you may qualify for either a USDA guaranteed loan or a USDA direct loan. Depending on their circumstances, the program can offer qualified applicants one of two options: a federal guarantee of a mortgage through a commercial bank, or a direct loan from the government. Both are 0% down payment loans. The home must be located in an area with a population of 35,000 or less and the home must be a primary residence. Loans are available to those with low and moderate incomes. Income limits vary depending on where you live and the loan program. In general, a credit score of at least 640 is ideal, but you may still qualify if your score is lower. Also, you cannot be delinquent on any federal debt and must be a U.S. citizen or legal nonresident alien.
USDA Loan Options:
- Purchase
- Rate/Term Refinance (must be current USDA Loan)
VA
A VA loan is a mortgage loan available through a program established by the U.S. Department of Veterans Affairs (VA). With VA loans, veterans, service members, and their surviving spouses can purchase homes with little to no down payment and no private mortgage insurance and generally get a competitive interest rate. VA loans are available to active and veteran service personnel and their surviving spouses, and are backed by the federal government but issued through private lenders. VA loans have generous terms, such as no down payment, no mortgage insurance, and no prepayment penalties. VA loans help active service members, veterans, and their surviving spouses become homeowners. They provide up to 100% financing on the value of a home. Eligible borrowers can use a VA loan to purchase or build a home, improve and repair a home, or refinance a mortgage. The VA sets the qualifying standards, dictates the terms of the mortgages offered, and backs the loan, but doesn’t actually offer the financing. Instead, VA home loans are provided by private lenders, such as banks and mortgage companies.
VA loan Options:
- Purchase
- Cash Out Refinance
- Interest Rate Reduction Refinance Loan (IRRRL)
- Rate/Term Refinance
A jumbo loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). The primary advantage of a jumbo loan is that it allows borrowers to take out a mortgage that exceeds the limits put in place by the FHFA. This limit varies by state—and even by county. The FHFA sets the conforming loan limit size for different areas on an annual basis. Just like traditional mortgages, minimum requirements for a jumbo mortgage have become increasingly stringent since 2008. To get approved, you’ll need a stellar credit score—700 or above—and a very low debt-to-income (DTI) ratio. The DTI should be under 43% and preferably closer to 36%. Although they are nonconforming mortgages, jumbos still must fall within the guidelines of what the Consumer Financial Protection Bureau considers a “qualified mortgage”—a lending system with standardized terms and rules, such as the 43% DTI. If you have your sights set on a home that costs close to half a million dollars or more—and you don’t have that much sitting in a bank account—you’re probably going to need a jumbo mortgage.
Key Takeaways:
- A jumbo loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA) and cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.
- Homeowners must undergo more rigorous credit requirements than those applying for a conventional loan.
- Approval requires a stellar credit score and a very low debt-to-income (DTI) ratio.
- The average annual percentage rate (APR) for a jumbo mortgage is often par with conventional mortgages, while down payments are roughly 10% to 15% of the total purchase price.
GRANTS
FHLB HELP Grant
The Federal Home Loan Bank of Dallas, in partnership with participating member lenders, provides funding for qualified buyers via the Home Equity Leverage Partnership (HELP). Through member institutions, HELP assists low-income-qualified, first-time homebuyers with down payment assistance and closing costs.
Homebuyer Requirements
- Only first-time homebuyers are eligible for the program.
- HELP funds may not exceed $15,000 per homebuyer.
- Household income must not exceed 80 percent of the area median income.
- Homebuyers are required to complete a Homebuyer Counseling Program.
- Homebuyers must contribute $500 of their own funds toward the required down payment or closing costs.
- Homebuyers cannot receive any cash back at closing.
- Homebuyers are required to sign a five-year retention agreement.
HAT Program
Mississippi Home Corporation (“MHC”) has contracted to administering the Mississippi Employer-Assisted Housing Teacher Program (“HAT”) on behalf of the Mississippi Department of Education (“MDE”) that provides down payment and closing cost assistance to ease the initial financial burden of home ownership to qualifying teachers, under the MS Legislative Critical Teacher Shortage Act of 1998. To meet this contract, MHC administers the HAT Program that will utilize funds from MDE.
Features of the Employer-Assisted Housing Teacher Program:
- MDE Employer Assisted Housing Teacher Program Loan Agreement is converted to an interest-free grant if the approved applicant is participating as a licensed teacher and agreeing to employment of service in a school district that is located in a geographical area of the state where there exists a critical shortage of teachers as designated by MDE, for a period of no less than three (3) years;
- Maximum State assistance: up to $6,000;
- MDE assistance can be used for down payment (less Borrowers required 1% down payment contribution), closing costs, prepaid expenses, Private Mortgage Insurance (PMI), Mortgage Insurance Premium (MIP), Guaranteed Fee or VA Funding Fee, if applicable (Contact your Lender.);
- Minimum required down payment from Borrowers own funds (1% of the Sales Price and one (1) month Principal, Interest, Taxes & Insurance (PITI) reserves). Reserves may be gifted from a relative;
- No income limits; and
- Residential properties must be in the county in which the teacher is employed and that is in a critical shortage school district which is determined by the MS Department of Education.
Qualifications of Applicant:
- Teacher agrees to render service as a teacher in the District for a minimum of three (3) years commencing with the Beginning School Year once loan is closed.
- Applicants who meet the FHA, VA, Rural Development Guaranteed, Fannie Mae or Freddie Mac conventional loan credit eligibility requirements.
Property Requirements:
- HAT Requirement – The property must be located within the county of the school district in which the teacher will be employed.
- Owner-occupied
- Single family detached
- Condominium and Townhouse units
- Units in Planned Unit Developments
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