There's a lot of buzz in the marketplace about 100% financing for first time homebuyers. It seems they get all the perks, right? Below market interest rate (Tennessee Housing Development Agency loans), reduced mortgage insurance, the highest allowed seller paid contributions, etc. However, if you income qualify, you don't have to be a first time homebuyer to receive some of these benefits. You may be able to slip under the umbrella of Fannie Mae's MyCommunityMortgage.
MyCommunityMortgage is Fannie Mae's affordable lending product targeted toward low and moderate income communities and borrowers. Its benefits include lower minimum required mortgage insurance and no required down payment or borrower contribution for one-family primary residences. In other words, 100% financing is allowable. In addition, it allows for the seller to pay up to 3% of the sales price/appraised value toward closing costs. And guess what? You don't have to be buying a home. This product is also allowed for rate/term refinances, too!
What are the income limits? They are 100% of the HUD Median income for the area in which the property is located. You can figure out your area income limit by visiting www.fanniemae.com or just ask your lender. For example in Knoxville, TN and the surrounding areas, the income limit is $54,800.
How about your credit? There is no minimum credit score, but 620 is a good rule of thumb. However, if you get an approval through an automated underwriting system, there's a chance that you could dip a little lower on the credit score. You may also qualify for a manual underwrite, where a real live human makes a decision on your file if you can't get automatic approval. To qualify for a manual underwrite, though, you can't have any history of bankruptcy, foreclosure, collections, judgments or delinquent house payments. Sometimes, a person doesn't have a credit score. In that case, you must prove that you have a positive non-traditional credit history - that you pay your car insurance, utility, cable and phone bill on time.
The maximum loan amount for this product is $417,000. I'm not sure who can afford a home at that loan amount when they may only earn $54,800 a year. But if a house is the only debt you have and the interest rate is low enough, I guess anything's possible.
So, if you think you might be a fit, make sure to inquire with your mortgage lender about this product. It's a peach.
Kristin's articles on Home Loans are very practical, consumer friendly information written in PLAIN ENGLISH. Consumer education is critical to what is most often a family's largest and only investment - their home.
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Kristin Abouelata, Mortgage Specialist with Mortgage Investors Group
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