About Government Refinance and Home Purchase Programs

Predictions of mortgage interest rates shooting up have been floating around for many months. In May of 2013 when mortgage rates moved higher on whispers that the Fed was going to take its foot off the pedal with regard to its Quantitative Easing program, some pundits speculated that mortgage interest rates would move steadily higher for years to come. But a funny thing happened — rates leveled out last summer and haven’t made an major, lasting moves since then. Rates on most 30 year fixed Fannie/Freddie conventional loans have remained in the mid to high 4’s and rates on 30 year fixed FHA and VA loans have stayed in the mid to low 4’s.

There is no telling what will happen to rates going forward, and it is still a safe bet that in the long run rates will move higher, but for now mortgage interest rates remain quite low by historical measures. With Ben Bernanke out as the Fed Chair and Janet Yellen running the show at the Fed now, it remains to be seen what the Fed will do to continue to stimulate the sluggish US economy.

While the future of mortgage interest rates is unknown, what is known is that rates are historically low right now. If you have considered purchasing a home or refinancing your current mortgage, now is an excellent to contact us to learn more about the various government-backed mortgage programs that are still available.

Just fill in the contact form in the sidebar for refinance information or for home purchase programs fill in the form on this page.

Of the four main government-backed home purchase programs, the Fannie Mae program requires the biggest down payment, with a down payment requirement of at least 5%. In addition, the Fannie Mae program has stricter debt-to-income ratio requirements as well as higher credit score requirements than some of the other programs. Despite all of this, the Fannie Mae program remains a popular choice for those who can qualify for it for a couple of reasons:

1. No up front fees: The VA charges a 2-3% up front fee, the USDA rural housing program charges 2% up front, and the FHA charges a 1.75% up from mortgage insurance premium. With the Fannie Mae program there is no up front fee and that saves buyers thousands of dollars in many cases.

2. Temporary mortgage insurance: With the FHA and USDA the mortgage insurance (or equivalent thereof in the case of USDA loans) is set for the life of the loan. With the Fannie Mae (conventional) program the mortgage insurance (sometimes call PMI) can be dropped when you have 22% equity in the home. And when a 20% down payment is used there is no mortgage insurance requirement at all.

Not everyone has the income, credit scores, or down payment needed to qualify for a Fannie Mae home purchase loan. For the folks who don’t, the VA, FHA, or USDA programs are excellent choices. But for folks who can qualify for a Fannie Mae loan, it can be the best choice.

Contact us in on our home purchase page to learn more about the Fannie Mae home purchase program as well as the other home purchase options.

On the surface, you might think the FHA home purchase program has some things going against it. FHA loans require a 1.75% up front fee rolled in to the loan and FHA loans include monthly mortgage insurance for the life of the loan as well. But there several tremendous advantages of the FHA program that keep it very popular.

1. Lenient credit requirements: While a minimum credit score of 620 is needed in most cases, the FHA is significantly more lenient on past credit blemishes than any of the other programs out there. The wait period after a chapter 13 bankruptcy in just 12 months and for chapter 7 bankruptcy it is just two years. The wait period after a foreclosure or short sale is just 3 years. And with FHA loans, while some outstanding collections must be paid off the FHA tends to allow medical collections to remain unsettled.

2. Less strict debt to income requirements: While the USDA and Fannie/Freddie purchase programs have very strict debt to income requirements, the FHA (and VA) programs tend to allow the ratios to stretch higher.

3. Lower and easier down payment requirements: The FHA only requires a 3.5% down payment. The minimum down payment for the Fannie/Freddie programs is 5%. Further, the FHA allows the 3.5% down payment to be given as a gift from family members. Other programs tend to be more strict about the down payment money coming from the borrower.

4. The FHA program is available to all: The VA program is only available to eligible military veterans and USDA rural housing program only applies to eligible areas considered sufficiently rural. While there are FHA restrictions on some condo complexes, the FHA program works on all single family homes in the US.

To learn more about the available government home purchase programs, including the FHA program, contact us on our home purchase page today.