With more than 15 million jobs added in the past decade, the U.S. economy isn’t showing signs of slowing down anytime soon.
More jobs and a better economy translates to more consumer confidence, and this leads to even more home buyers.
When you add low mortgage rates to these factors, 2017 should be a big year for home buyers.
As a home buyer, it’s helpful to enter this market with as much knowledge as possible.This is even more true for buyers that don’t fit the “cookie cutter” mold.
The more you know about what it means to be a home buyer, the better chance you’ll have locking down your dream home as quickly and easily as possible.
FHA Loan to the Rescue
Sandy, a school teacher in Alabama, always wanted to have a home of her own. Being a single mom on a school teacher’s salary, however, made the American dream just that – a dream.
Not only was Sandy living paycheck to paycheck, she didn’t have much in the form of savings. Not helping matters was a difficult divorce, leaving Sandy with a credit score of just 599.
With mortgage rates continuing their upward trend, Sandy’s goal to own a home seemed to continue to get further out of reach.
Fortunately for Sandy, the Federal Housing Administration (FHA) makes homeownership more realistic.
Thanks to relaxed credit standards and lower downpayment requirements, FHA loans are ideal for someone like Sandy. The FHA will approve mortgage will credit scores of just 580 and downpayments of as little of 3.5 percent.
FHA loans can offer the relaxed standards because they are insured by the Federal Housing Administration. They are also made available to U.S. home buyers and existing homeowners.
With Sandy’s credit score of 599, she was within the acceptable range to get approved for a loan.
Sandy also just learned that her tax refund was going to net her approximately 4 percent of the price range for which she was looking.
For Sandy, this meant being able to buy a home while having some leftover cash to help with moving expenses. Sandy’s homeownership dream came true thanks to the FHA.
Only One Year Tax Returns Needed
Benny works hard so that his wife can stay at home to raise their two children. This is an area where both he and his wife do want to comprise. He works in construction as an independent contractor.
Until recently, Benny’s business has doing well, but not well enough to purchase a home. Fortunately, Benny’s business has picked up and is now thriving.
But most mortgage guidelines require two years of tax returns when determining how much income can be used for your mortgage approval.
Due to his previous year’s income being substantially less than his most recent year, averaging the past two years wasn’t enough to qualify for the home Benny and his wife wanted.
Fortunately for Benny, not all mortgage loans have the same guidelines.
The Federal Home Loan Mortgage Corporation (FHLMC), also known as Freddie Mac, is a public government-sponsored enterprise (GSE) that was created in 1970.
Freddie Mac was chartered by Congress to keep money flowing to mortgage lenders in support of homeownership and rental housing.
Freddie Mac doesn’t make loans directly to home buyers, but they do write guidelines for mortgage loans.It was these guidelines that helped Benny buy his dream home.
This is because, unlike most mortgage programs, Freddie Mac allows for just one year of information
Benny could use the tax returns for his most recent year’s income to qualify for his new home. Again, had he needed to average his past years of income, he wouldn’t have qualified.
Benny and his family are now in their dream home thanks to Freddie Mac’s underwriting guidelines.
New Homeowners Thanks to HomeReady™
Robert and his wife Susan had just begun their home search when, due to unexpected illness, Robert started racking up some sizable debt in medical bills.
The medical bills turned into collections. These collections took a significant toll on Robert’s credit. Bob and Susan thought they would have to put their homeownership goals on hold for a while.
Thanks to Fannie Mae’s HomeReady™ program, they didn’t have to put off their goals for long.
HomeReady™ is a mortgage program, created in December 2015, is a government-backed mortgage program made available via Fannie Mae.
HomeReady™ is available when purchasing or refinancing any single-family home, as long as the homeowner meets income limits of the property location. The program also allows household occupants to “pool” their incomes together in order to get qualified for a home loan.
Unlike other mortgage programs, you can use household income without using household credit.
In other words, in cases like Bob and Susan’s, both of their income can go towards getting qualified for the loan. At the same time, Bob’s credit won’t negatively impact their ability to get approved.
Since Bob and Susan didn’t own any other residential property in the U.S., all Susan had to do was complete the required 4-6 hour online homeowner counseling course, and then they were eligible for this great program.
What Are Today’s Mortgage Rates?
Fortunately for today’s homebuyer, underwriting guidelines continue to become less stringent, and there are many unique mortgage programs out there.
Even if you think your situation may be unique and perhaps impossible, be sure to explore all your options. You may be pleasantly surprised!