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Unformatted text preview: cash method. 6-16 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 6: HARD MONEY LOAN & CONVENTIONAL LOANS LOW DOWN PAYMENT CONVENTIONAL LOANS
Both the Federal National Mortgage Association and the Federal Home loan Mortgage Corporation recognize that accumulating a down payment and the required closing costs keeps many people from buying a home. To help this situation, both have created several low down payment programs. Although there are minor differences between Fannie Mae and Freddie Mac, the gist of the popular Fannie/ Freddie 97 programs is as follows: A down payment of only 3% is required, meaning a 97% loan–to–value (LTV) loan is granted. Income qualifying ratios are easier. Borrowers must have an excellent credit history. Borrowers must attend a home buyer educational seminar. In some cases there may be an income level requirement for the borrower (these limits are more generous in California than in most other states). The loan can be used to buy only single–family, principal residences, including condos, planned unit developments, and manufactured homes attached to a permanent foundation. Another popular Fannie Mae/Freddie Mac offering is called the Community Home Buyer's Program. This plan is designed especially to help low– and moderate–income home buyers and features what is called the 3/2 option. The 3/2 Option provides for a low 5% down payment, but with a twist. It allows borrowers to put only 3% of their own money toward a down payment. The other 2% may be obtained from family gifts or by means of a grant or loan from the state, a local government agency, or a nonprofit organization. Traditional credit standards are required, but other underwriting criteria are eased to qualify applicants, with greater emphasis on stable job history, steady rent and utility payments, and a ceiling on the qualifying income level, since the program is limited to those less affluent. Though creditworthiness is always important, a greater percentage of applicants' gross monthly income may be used to meet mortgage payments. Because of the high loan–to–value ratio, the 3/2 option loans must be covered by private mortgage insurance, discussed late...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10