There are a number of significant loan programs that are currently available. Which program you will want to use is dependent on your specific requirement. It is important that you have a basic understanding of each to help you ask your lender questions or to clarify questions you may have to get the best possible loan solution for you. Keep in mind the information you see on this web page is to serve as a guideline only. Loan programs are often changed by lenders and the government to meet new economic changes.
FHA stands for Federal Housing Administration and is the largest government insurer of mortgages. It is used on single family, multifamily and manufactured homes. FHA has two types of programs, the FHA 203B and the FHA 203K. First there are certain requirements needed as shown below.
- Down payment is 3.5%
- Seller contribution can be upto 3%
- Maricopa loan amount is a maximum of $346,250
- Fico scores most likely to obtain an approved loan are 600 or better
- The home must be owner occupied
- MIP insurance is required for all loans with less than 20% down.
The FHA 203B is the common type of FHA loan. The home must be in good condition and without safety issues. Other conditions are that the roof must have at least a 2 year life, pools must be filled and in working condition, and no bare electrical wiring.
When you are buying a home that needs more than a little TLC and you have a flexible move in date, this FHA loan gives you the opportunity to do the repairs after close of escrow. The repairs have to be done by a licensed contractor(s). The cost of the repairs can be added into the home loan. FHA provides a repair consultant or inspector to help you planning the repairs and to make sure the job is done correctly.
A conventional loan is not guaranteed or insured by the federal government. These are referred to as a mortgage loan and is often a part of the Fannie Mae or Freddie Mac as government sponsored enterprises (GFEs). The GFEs "buy" the loan from the original mortgager often the day it is originated. These loans are typically for buyer with good to excellent credit and require more money down than an FHA. There are two types of conventional loans, conforming and non conforming.
These loans follow the GFE terms and conditions. At 20% down lenders can be very flexible. At less than 20% the conditions can be more rigourous and often require private mortgage insurance (PMI).
A non-conforming loan is a loan that fails to meet bank criteria for funding. Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. Non-conforming loans can be either A-paper or sub-prime loans.
Some guidelines are:
- As low as 5% down
- Recommended FICO is 680
- Seller can contribute to the buyers closing cost (seller contribution)
- PMI is required for less than 20% down
- Maximum loan in Maricopa County is $417,500.
Military personnel who have served for 181 days or more can qualify and need to obtain a VA certificate of eligibilty (DD214). This type of loan can take longer than a FHA or conventional loan to process, often as much as 45 days. Some requiements are:
- As low as 0% down. The buyer may be able to finance the VA funding loan fee. This does not mean that all closing costs are covered.
- Seller may contribute 6% at least now (it may reduce to 3% in the near future).
- Maximum loan amount in Maricopa county is $417,000.
- This must be owner occupied.
- FICO scores are usually at least 600
These loans are designated for rural areas in Maricopa county. Some of these areas include Waddell and areas in Surprise as an example. Some of the notes on USDA loans are:
- Can be 0% down
- Seller may contribute upto 4% for buyers closing costs.
- Maximum loan is $417,000
- One unit structures
- Fee required for all loans with less than 20% down
When a FHA home goes into foreclosure, it becomes the property of United States Housing and Urban Development (HUD). They will sell the property at market value as soon as possible, Some notes on HUD homes are:
- As low as $100 downpayment on FHA 203B loans (no 203K loans).
- Maximum of 3% seller contribution to buyers closing costs
- Maximum loan is $346,250
- Fico score should be 600 or better
- If the downpayment is less than 20% PMI is required
Home Path Homes
When Fannie Mae has foreclosed on a home, it if offered for sale. Some notes on these homes are:
- Must use a Home path lender
- 3% downpayment
- For both owners and investors
- FICO score at least 660
- No PMI
- No Appraisal fees
- Special home path financaing is available
Homes sold by Freddie Mac are offered by the Home Steps unit of this GFE. They often have incentives for buyers and are usually move-in ready. In this market these are sought after homes and are not the market very long. They have a 2 year warranty and Freddie Mac will contribute upto 3.5% for sellers closing costs.