FHA has been a very popular program but with the recent changes, it is losing it's popularity! The monthly mortgage insurance premium is now 1.35% and as of June 1, 2013, it is now there for the life of the loan. With those changes, there are some conventional mortgage options that are gaining popularity.
For most homebuyers, you need 5% down for a conventional mortgage. However, if you have at least a 700 credit score, you may be able to qualify for a My Community Mortgage. This is a regular 30 yr mortgage, fixed rate, but you only need 3% down. The interest rate may be slightly higher than FHA, but the mortgage insurance is lower. You can also eliminate the mortgage insurance payment once you have 20% equity in the home (after a minimum of two years). There is an income limit of 100% of the median area income – in Minneapolis/St Paul, it is $83,900. You can not own another home with this program, but you do not need to be a first time homebuyer.
The seller is allowed to contribute towards the closing costs -up to 3%. You may be able to use gift money as part of your down payment – it will depend on the investor. You may also need to take a first time homebuyer class.
This program may also help if you are looking at a condo that is not FHA approved.
Talk to your loan officer about using this option. It may help to lower your payment and if you are planning to stay in the home for a longer period of time, it will help so you can eliminate the mortgage insurance when you have enough equity. Remember you will need a credit score of at least 700 in order to use this program. This may give you an option to help you get into a home with less than 5% down!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants – Email – Website
