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The Department of Agriculture not only certifies that your meat products are up to standard, they also have an entire division dedicated to making housing affordable for those living in farming communities. This is another 100% financing loan offering really great interest rates. It’s so good in fact, that in most cases, the monthly payments are even lower than a comparable conventional loan with a 3% down payment. Because the rates are so stellar, and with the cyclical nature of farming, the USDA loans can be harder to qualify for. Despite that, I’ve helped hundreds of people successfully get them over the years. Along the Wasatch Front in Utah there are no available USDA financeable areas in Salt Lake, Davis, or Weber counties. But Tooele, Summit and Wasatch counties are wide open. In Utah County, the areas south of the Spanish Fork River and west of the Jordan River still qualify for this great program. And as long as the federal government keeps shutting down over budget constraints during the last week in September each year, it’s likely to stay that way. Ye haw!
Willie Nelson (name has been changed) had just gone through a divorce and was left with no assets to his name, but he’d managed to keep his credit completely clean and had a well-paying job. This hard-working cowboy boot scooted into a place of his own with nothing out of his pocket. I offered to pay for a moving company to help him with the transition, but he assured me that everything he owned was already in the bed of his truck.
Loan to Own
This program is a second mortgage that lends you up to $40,000 for a down payment, closing costs, interest rate buydown, etc. It’s administered by the city of Provo, who is the custodian of federal grant funds allocated to help lower-income households achieve home ownership. Loan to Own is only for Utah County and works in all cities except Eagle Mountain, Alpine, & Fairfield. This program is near and dear to my heart; I used to teach the class that’s requisite to receiving the funds. The feds haven’t raised the income limits as much as they should, given the increase in the price of homes, so this program can’t help as many as it used to. Minimum credit score is 650. The program will work on top of FHA and Conventional loans.
Don Quixote and Dulcinea (names have been changed) had five children together and had way outgrown their two bedroom apartment. They had always wanted a bigger place with a yard for the kids to play, and the entire family hoped to one day have a dog. But they had no money and felt that none of this would ever happen. Then a co-worker mentioned how I had gotten them A LOT of grant money and helped them out of the same situation. The rest is history! The dog acquisition has yet to be confirmed.
Just like vanilla ice cream, this is the most popular program available. Conventional loans are mostly homologous across the country. There are two ginormous agencies known as Fannie Mae and Freddie Mac that make up all the rules governing every aspect of conventional loans. The rules are expansive. There are no income limits, but there are maximum loan limits, which are currently set across the U.S. at $726,200. Effectively, your credit score needs to be above 660 to qualify for a conventional loan. The automated underwriting system for conventional loans has some tremendous advantages. For example, most of the time we can get away with only one month of documented assets and one year of employment documentation, and sometimes we even close the loan without getting an appraisal on the subject property.
The interest rates on FHA loans are almost always lower than similar scenarios on conventional loans. Consequently, FHA is always worth having a look at. If you don’t fit into the perfect little box, FHA may become your best friend (besides me of course). If your credit score is less than 700 and you want to finance more than 60% of the value of a reasonably priced home, let’s check out FHA. Provided your FICO is over 640, you’ll get the same rate as if it was 840. By “reasonably priced” I mean that FHA has set maximum financing amounts across the country by county. For locals, those loan limits are $601,450 in Utah County, $619,850 in Salt Lake Couty, and $744,050 in Weber/Davis Counties. FHA is also the loan of choice if you have extra debt. This program is the most liberal when it comes to approving higher debt-to-income ratios. FHA will also finance a home for you when you are only 12 months out of a Chapter 13 and 24 months out of a Chapter 7 bankruptcy. FHA will finance up to 90% of the value of the property with a FICO score of 580 and up to 96.5% of the value with a 620 FICO. Even better, FHA has a slick little program allowing you to “streamline refinance” your loan down to a lower interest rate as soon as you’ve made six payments on time, without needing to requalify!
A home loan through the Veteran’s Administration is quite frankly the best loan you can get. And if you qualify for one, I thank you for serving our country. VA allows you to buy up to a $4,000,000 home with zero down and without any mortgage insurance. Even better, the interest rate is the lowest of any loan program out there.
Sergent Pepper (name has been changed) retired from the Navy and bought his dream house in the Heber Valley a few years ago. He had a significant down payment and a certain credit union bearing the name of one of the branches of the armed services told him he should get a conventional loan. He came to me for a second opinion (as many do) and I was able to get him a better deal on the conventional loan. Moreover, when I suggested we look at VA, he was elated to save even more money on his monthly payments.
This is the official first-time homebuyer program for the state and offers fantastic zero down loans for homes priced less than $516,100 in Utah County, $434,700 in Salt Lake County, $536,900 in Weber, Davis, Summit, and Wasatch Counties. Household income is capped around $114,900 for two people and $134,100 if three or more people share a place (varies slightly by county). The interest rate will be higher on these loans but they are more lenient than other 100% financing programs, which makes Utah Housing extremely popular with many of my clients.
Construction financing is used to build a home on a parcel of land that you are purchasing or already own, and where you will contract with a builder to manage the project for you to completion. If you have experience, you can also build the place yourself. Custom construction loans give you the ultimate flexibility to build the place exactly how you want it, according to your plans and your specifications. There are two different types of construction loans. The traditional construction loan will finance up to 90% of the cost of the entire project or up to 80% of as-completed-value, whichever is less. You don’t make any payments during the course of construction and once the home is finished, the construction loan gets refinanced to a more traditional long-term mortgage. The other loan used for building a home is a One-Time-Close construction loan. Most of the same terms apply with this program, other than you will make interest-only payments while the home is being built, and when the home is completed, the loan converts over to a 30 year fixed rate without needing to refinance. There are dozens if not hundreds of considerations as to which type will b1e best for you, so let’s talk through your scenario and make your dreams come true!
Interest Rate Buydowns
There are two types of buydowns, temporary and permanent. The permanent buydowns cost more because they last for the duration of the loan. You can qualify at the bought-down rate, because it becomes the Note rate, so there is a potential to save a lot of money by buying down the interest rate. As a rule of thumb, it takes about four years to get your buydown money back on a permanent buydown with the reduced monthly payments. So if you’re not planning to keep this loan open for that long, don’t waste your money. Temporary buydowns have become in vogue over the last year since interest rates rose so rapidly. A one-, two-, or three-year buydown results in dramatic monthly savings and functions much like a savings account that subsidizes your monthly payments for the desired term.
Tommy and Gina (names have been changed) had outgrown their previous place but felt that the home they really wanted was $500 outside of their current monthly budget. We talked about negotiating that the seller paid for a 2-1 buydown for them which could help them get into the place they fell in love with and made it $200 under their budget!
Cash Out Refi
There are dozens of reasons that one would want to use the equity in the home to do other things. Remodeling, updating, paying for college, consolidating extraneous debt, purchasing additional property, covering medical expenses, paying for a wedding, dividing marital assets, etc. My job is to assist you in making the most of the hurdles that life presents and negotiate your way to finding the best available value with your resources.
Jack and Dianne (names have been changed) thought they were just fine when we first sat down to look at a 30 year refi to lower their monthly payment. They knew that they had amassed some credit card debt, but they weren’t entirely sure exactly how much that was. When they each saw the list on the table in front of them, they grew increasingly aware that the spending was out of control. I took a few minutes and proposed a plan that would roll all their debt into one 15 year loan that would also lower their minimum monthly payments by several thousand dollars. Additionally, if they took what they had been paying and put aside $500 per month for fun/emergencies/etc., then dumped the rest of their former debt payments toward the house, they would be completely debt-free in only seven years. That was three years ago and Dianne still reaches out to me every single week to thank me for helping them.
Sometimes market conditions are such that it makes fiscal sense to swap your current home loan for something more efficient. Almost always, that prospect includes a lower interest rate. Sometimes you want to lower your monthly outgo to free up funds for other things, and sometimes you have an excess of funds and want to allocate that abundance toward a plan to pay your home off faster. In each scenario, I’ll shoot straight with you to help you determine the best course of action, even if that means maintaining status quo for the time being.
These loans can be a great tool for people who are buying a home but don’t want to make monthly payments, nor spend more of their cash than needed. They are also wonderful for existing homeowners who need to free up capital of receive an allowance for living expenses. The amount available is age dependent. We can run a quick look in just a few minutes together.
This is when you want to borrow more than the conventional conforming limit will allow. Generally, the rate on jumbos is higher, but sometimes they’re not. The rates and rules will vary from bank to bank. Plan to finance less than 80% of the property value.
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