With FHA, a downpayment of at least 3.5% of the purchase price is now required, but that can come as a gift from a family member, an employer (tip:  convert a raise or bonus into downpayment assistance), or from a nonprofit institution or government grant.   Among the attractions of FHA is that there are no institutionalized credit score requirements, though individual lenders who process FHA loans will usually have their score standards.  Expect scores below 620 to pay a price;  approval for those under 580 is dicey.  First-time buyers with nontraditional credit histories have some hope with FHA, which is open to use of alternative credit scores.  Alternative scores assess risk based on a person’s rental and utility payment history when there is not enough credit information for a regular FICO credit score. 

With both VA and FHA, there is flexibility with respect to income, credit history and financial reserves.  A ding in one of these areas can be offset by strength in one or both of the others.  Ultimately, for FHA and VA to be approved, a mortgage application, the loan has to make financial sense.  FHA will insure to a maximum loan amount of $271,050 anywhere in the U.S. and up to $625,500 in high-cost areas.  FHA loan limit calculator

Borrowers pay an upfront fee of 1.75% of the loan amount.  The seller is permitted to pay this or it can be rolled over into the loan amount.  Another 0.55% premium is paid monthly (1/12 x 0.55%).  What about programs at Fannie Mae and Freddie Mac?  Indeed, there are programs that are still on the books, such as the Fannie Mae “My Community,” Community 100 and Flexible 100 mortgages.  You may see them on Fannie Mae’s web site, but not in real life.  The fact is these mortgage products rely on private mortgage insurance and mortgage insurers are refusing to underwrite 100% loan-to-value purchases these days.  And the option of using a second trust to achieve 100% financing is also dead these days. Eventually we would expect these options to return once the market has demonstrated that it is once again stable, but it probably won’t happen for a while yet. 

Also ask me about the USDA 100% program.  Give me the property address you are interested in buying and I will tell you if it qualifies.  You would be surprised at some of the areas that do qualify.  All of Delaware qualifies, there are 9 counties in MD where the whole county qualifies and the rest have pockets of areas within the county that are eligible.  © 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Finance®

    Brent Mendelson, VA Loan Officer
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