Long gone are the days when you could buy a home with poor credit. Six-twenty is now the minimum required credit score to qualify for most government-backed and conventional mortgages, including Federal Housing Administration (FHA)-insured loans. Veterans with lower credit scores who apply for loans via the Veteran’s Affairs Loan Guaranty (VA Loan) program may still qualify for a mortgage; however, they generally require a minimum of 12 months with no derogatory credit or late payments.
If you want to purchase a home using an FHA-backed loan, you must now provide a minimum down payment of 3.5 percent (conventional loans usually require at least 5 percent). Although most down payment assistance programs have been abolished, some home buyers can still obtain part or all of their down payment as a gift from a family member. Despite some rumors to the contrary, the $8000 home buyer tax credit available to eligible home buyers up to December 1, 2009 cannot be used as your down payment on a home. However, FHA may allow your tax credit to be advanced to you in order to offset your closing/settlement costs and/or buy down your interest rate. Contact your mortgage professional for more information.
Some veterans who obtain a mortgage using the VA Loan program can still qualify for zero-down mortgages and can finance up to 102% of their mortgage (2 percent covers the VA funding fee); however, they must meet certain credit and income qualification guidelines. For more information, contact your local mortgage professional.
Most home buyers using conventional or government-backed mortgages to purchase a residence can obtain up to 6 percent of the sales price in seller-paid closing cost assistance to offset your settlement expenses, to include buying down your interest rate.
Maximum home loan limits for conforming conventional mortgages in high-cost areas has increased to $729,000. Why is this important to you? Mortgages that conform to Freddie Mac and Fannie Mae guidelines typically enable home buyers to obtain the most competitive interest rates because they can be sold in secondary mortgage markets. Loans that do not conform to these guidelines are usually subject to higher (sometimes much higher) interest rates. These loan limits are temporary, however, and are only valid on homes closed by December 31, 2009. To find the maximum loan limit is for your area, please visit https://www.efanniemae.com/sf/refmaterials/loanlimits/ .
Although conforming loan limits for most VA-guaranteed and FHA-insured mortgages remain at $417,000, limits for conforming FHA-insured home loans in some high-cost areas have increased to $625,500 (or higher in some areas) for loans closed through December 31, 2009. Why is this important to you? VA-guaranteed and FHA-insured loans require low to no down payment compared to most conventional mortgages and usually allow the home buyer to obtain more competitive interest rates because the loans are insured (or guaranteed) in the event that the homeowner defaults. To find out if you live in a high-cost area, visit http://www.fhfa.gov/GetFile.aspx?FileID=134 or http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf