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Awesome Loan Programs

Awesome loans Introduction

There are lots of really awesome loan programs coming out right now that can help buyers get a lot more house for their money. The ones I’m going to write about in my website are the Acorn Housing Program, The Oregon Bond, The Down payment Assistance Program for the Portland Urban Renewal Programs, the Portland Housing and FHA.

Acorn Housing

Acorn Housing has been in Oregon now for about 5 years. My daughter, Lisa, who is also my partner in real estate, was one of the first to use it! It is an awesome program that allows people to buy a house with just $500 cash. The ACORN loan program is designed to help first-time home buyers (and those who don’t own another home at the time of closing) get a great loan. ACORN housing was founded to help defeat predatory lending practices- they partner with different lenders in marketplaces across the US to provide their home buyer services in exchange for the below market rate loan. The mission of ACORN is to increase homeownership opportunities among low-to-moderate income individuals and families.

It used to be that in Portland, you could only get an Acorn loan through Bank of America - but that is changing. Chase will begin using the Acorn loan too. The terms will be a little different at each bank. They are still finalizing their rules, but here is what I know about each one right now:

The 2 main differences are in the amount that is financed and the income limits that are allowed. Chase has 100% financing with no down, and Bank of America requires 3% down….but actually allows you 100% financing if you use their tricky little method. Here is how it works:

You do have to put 3% down- which is a lot. But it can be gifted either by the seller or a friend or relative…. And they even have ways of lending you the 3% as a down payment assistance that can be paid back later.

The way it would be gifted by a seller is that you would write the offer for 3% higher than the price of the house, and have the seller contribute 3% to buyer’s down payment. Or closing costs. For example: If you are buying a $200,000 home, you would write the offer for $208,000 with the seller contributing 3% to your down payment ($6,000) and 1% to your other closing costs. The limit on the Acorn Housing loan programs allowable contribution to closing costs is 4%.....which is a whole percent higher than most loan programs. There is no PMI or mortgage insurance required- which is awesome, because most loan programs make you pay a half a percent PMI if you don’t have 20% down!

Chase allows you to get 100% financing with a really low PMI of about $75 to $100. They also allow a higher income level- when I last checked it was around $83,000 per year depending on how many are in your family. Bank of America’s income limit was closer to $55,000 per year. So that is a huge difference.

Here are the other main features of the Acorn Loan- which both banks utilize:

• They don’t go by your credit score!
• You have reduced interest rate-the whole loan at the same low interest rate, instead of doing an 80-20 loan….which means 80% at the low percentage, and 20% at a much higher percentage
• They accept self employment income, boarder income, and $1200 a month undocumented income.
• As long as one borrower has at least 24 months of uninterrupted income, then the other borrower can use their shorter income period or 1 year of self employment income.
• Income limit is 125% of the county AMI- which is 80% of the average income for the area- so it varies with the county you buy in.
• There are three loan options: 30 year fixed, 40 year fixed, and 10/30 fixed rate interest only – all with a reduced below market interest rate to applicants that are qualified by ACORN. You only have one loan (not an 80-20) at one low rate with no PMI or prepayment penalties.

The ACORN PROCESS

As part of the prequalification process there are three steps that must be completed through ACORN:

1. First, you must attend an intake session. These are held every Wednesday night at 6:00 pm at 5102 SE Powell Blvd. (see attached map). Please bring all the paperwork listed below to the intake session to ensure that you get through the process as quickly as possible.
2. Once you’ve taken all your paperwork to ACORN, you will schedule a one-on-one appointment with one of their counselors. During this meeting they will review your income, assets, and credit history and will pre-qualify you.
3. Finally, you will need to attend a Home Buyer Education Class. These are held on the 1st and 3rd Saturday of every month, beginning at 9 am. These classes tend to get filled up quickly, so it’s important to let me know as soon as possible that you are considering this program and I can work to get you enrolled in the next class.

***All three of these steps must be completed prior to locking in your interest rate***

Please bring the most recent COPIES of the following documents to the intake session:

• Intake Form (included) – Filled out
• Copy of picture ID and Social Security Card
• One month's worth of current pay stubs for all employment for all borrowers
• Past two years of tax returns (1040’s and W2’s)
• Award letter or verification of any other source of income: SSI, Child Support, DPA, Retirement, etc. (if applicable)
• Last three months of bank statements for any saving and/or checking accounts (including 401K, IRA, etc.)
• Proof of rent for the last twelve (12) months (cancelled checks or landlord letter (included)
• Budget Sheet – Filled out
• Credit Report Fee: $20 individual (1-person) or Joint (2-people) Check or Money order ONLY: do not bring cash.

If you have any questions about these documents or about the ACORN – here is the official site info and Kevin or Clark will be glad to help you with either the Acorn Loan or other really cool loans that I will talk about below:

ACORN Housing Corp
5102 SE Powell Blvd.
Portland, OR 97206
http://www.acornhousing.org
Phone: (503) 788-9989
Fax: (503) 788-0242
Kevin Sheehan - Office Director
Clark Tierney

Or you can call
Shirley Ling
Mortgage Loan Officer
805 Broadway, 2nd Floor
Vancouver, WA 98660
360 - 696 - 5649 Tel
800 - 207 - 2884 Toll Free
866 - 825 - 8259 Fax
360 - 931 - 3269 Cell
http://ae.bankofamerica.com/shirleyling

Oregon Bond and down payment Assistance

The Oregon Bond Program has been around for a long time. It is a really good program to help people buy their first house if their income is moderate to low. The interest rates are low, and there is help with the down payment!

The income limits for the Oregon Bond and Portland Housing are about $79,000 per year for a family of 2 in Multnomah and Washington Counties and $91,000 per year for a family of 3 or more. The rates are as low as they get- right now, April 2008, they are set at 5.625. You can check the current rate by going to their website at http://www.oregon.gov/OHCS/SFF_Homebuying_Low_Interest_Home_Loans.shtml

They also have the down payment assistance program- this is taken from their website:

An Overview

Down payment Assistance Programs (DAPs) are intended to help eligible borrowers come up with the cash they need to close the loan. Most down payment assistance programs are limited to serving low-income first-time homebuyers, who earn 80% of the area median income or less adjusted for household size. OHCS sponsors two programs as described below.

The best one of all is the 20% Down payment Assistance Program for houses that fall in certain Urban Renewal areas targeted by the Portland Development Commission. This assistance actually lends you up to 20% of your purchase price of the home, at no interest, that doesn’t have to be paid back until you sell your home! Along with this goes the Tax Abatement Program….which means really low taxes for up to 11 years, and also the home improvement loan program to fix up your house- at low or no interest and not needed to pay back until you sell the house!

Sound too good to be true? It does to me too. But it is true. And if you are within the income range that qualifies, and buy a house in one of the targeted areas, you can benefit from it! These areas are the Lents neighborhood, which is basically from SE Powell to Flavel, and from SE 76th to SE 122nd. There is also the Interstate Corridor in North Portland which is out near the Max and north of Lombard. And the Gateway District, which is a crazily shaped area that is impossible to describe- but it is out in Gateway along the 205 Corridor. You can see the maps by going to the Portland Development Commission Website- or just contact me and I will help you find houses that are for sale in the areas.

Through the Portland Housing Commission and Oregon Bond there are other programs available:

Home Purchase Assistance Program HPAP

HPAP is a statewide down payment and closing cost assistance program specifically for low-income first-time homebuyers. For more information, contact the Oregon Banker's Association at (503) 581-3522 to find out about upcoming classes in your area.

Purchase Assistance Loan PAL
PAL is a secondary loan from OHCS to help low-income first time homebuyers come up with the cash they need to pay their closing costs and down payment.

Host is another program that offers help either $5000 credit for down payment, or some of it’s homes qualify for the 20% down. It’s name comes from Homeownership One Street at a Time (HOST) 503.331.1752.

Mortgage Assistance Program (MAP)
Sometimes a slight drop in the monthly house payment is all you need to afford purchasing your first home in the City or Portland. MAP eliminates the need for some types of mortgage insurance and may reduce your overall interest rate. The maximum loan amount is $50,000.

Individual Savings Account (IDA)
The IDA program is a 3:1 matched savings program for individuals under the 80% median income. Program participants save money in a special account that we monitor. These funds may be used for down payment and closing costs on a home.

FHA Loans
FHA loans are coming back into style! You only need to put down 3% and you can get a super low rate.

FHA allows for borrowers with less than perfect credit to receive the same interest rate as a borrower with unblemished credit. FHA insures 100% of the loan, eliminating the lender's risk and making them willing to lend to people who aren’t as “safe”. The borrower pays an upfront insurance premium which is approximately 1.5% of the loan amount. This money can be financed directly in the loan amount. The borrower also pays a monthly premium of .5% of the loan amount divided by 12 months. FHA requires down payment of 3%. This money can be a gift. No reserves are required. Closing costs can be financed in the loan amount.

Borrowers must provide proof of sufficient income to show ability to pay the mortgage. FHA guidelines are more relaxed, such as; a bankruptcy that was discharged at least 2 years ago, the use of alternative credit (utilities, cable TV, auto or medical insurance premiums, child care, school tuition, furniture or appliance store accounts) in lieu of traditional credit, and higher debt to income ratios. FHA interest rates are very competitive with conventional rates.

The newest guidelines for FHA-they have changed!

• The loan limits that were previously locked at $362,790 will be recalculated to 125% of the county’s median price, with a limit of $729,000. The interest rate is 6% as of this writing; however, there is mortgage insurance (see below).
• Minimum down payment is 3% (not including closing costs).
• Fixed rate and Adjustable rate programs are available.
• NO MINIMUM FICO REQUIREMENT
• Full documentation loan. No stated income loans.
• No buyer reserve requirement
• No income limits.
• The seller can contribute up to 6%, including closing costs, although the seller does not have to pay the closing costs.
• There can be non-occupant co-signers on the loan.
• You do not have to be a first-time buyer.
• Gifts are permitted for the entire 3% borrower investment and don’t need to be “seasoned.”
• Gifts are also permitted for all closing costs & pre-paid items.
• Down payment assistance programs are permitted, such as city first-time buyer housing programs.

Here is the downside of the FHA Loans- although I think in most cases just protects the buyer:

• There is mortgage insurance. It equals either 0.5% point per month, or 1.5% points up front. The up-front payment is deductible from your taxes during the year that you buy.
• There are stricter appraisal requirements
• Any operable or useful element in the subject property must have at least 2 or more years of useful life or it must be replaced.
• The appraiser must be FHA-approved.
• The appraiser can require a separate inspection upon any “visible” defect or if he/she has knowledge of any existing problem.
• The property must be structurally sound.
• It must have a useable garage.
• The property cannot have code violations.
• Each living unit must contain domestic hot water, sanitary facilities and a safe method of sewage disposal. Connection to public systems is required if available.
• Heating systems must be adequate for healthful and comfortable living conditions.
• Condo projects must be pre-approved; they can be spot-approved but this is much more difficult.
• Condo projects must have sufficient reserve funds.

Here are some other FHA Loans:
203(k) LOAN for Rehabs

This is a loan that enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage. A portion of the loan is used to pay off the seller's existing mortgage and the remainder is placed in an escrow account and released as rehabilitation is completed. Basic guidelines for 203(k) loans are as follows:

• The home must be at least one year old.
• The cost of rehabilitation must be at least $5,000, but the total property value - including the cost of repairs - must fall within the FHA maximum mortgage limit.
• The 203(k) loan must follow many of the 203(b) eligibility requirements.
• Talk to your lender about specific improvement, energy efficiency, and structural guidelines.

TITLE I LOAN
Given by a Lender and insured by the FHA, a Title I loan is used to make non-luxury renovations and repairs to a home. It offers a manageable interest rate and repayment schedule. Loans are limited to between $5,000 and 20,000. If the loan amount is under 7,500, no lien is required against your home. Ask your lender for details.
Source: HUD

ENERGY EFFICIENT MORTGAGE (EEM)?
The Energy Efficient Mortgage allows a homebuyer to save future money on utility bills. This is done by financing the cost of adding energy-efficiency features to a new or existing home as part of an FHA-insured home purchase. The EEM can be used with both 203(b) and 203(k) loans. Basic guidelines for EEMs are as follows:

• The cost of improvements must be determined by a Home Energy Rating System or by an energy consultant. This cost must be less than the anticipated savings from the improvements.
• One- and two-unit new or existing homes are eligible; condos are not.
• The improvements financed may be 5% of property value or $4,000, whichever is greater. The total must fall within the FHA loan limit.
Source: HUD

WHAT OTHER LOAN PRODUCTS OR PROGRAMS DOES THE FHA OFFER?
The FHA also insures loans for the purchase or rehabilitation of manufactured housing, condominiums, and cooperatives. It also has special programs for urban areas, disaster victims, and members of the armed forces. Insurance for ARMS is also available from the FHA.
Source: HUD

VA or Veteran Loans
There are several reasons why a VA loan may be preferable to a standard loan. Most important, if you qualify, you may obtain a VA loan even if you did not qualify for other loans. There may be no down payment required for a VA loan, depending on the lender. VA loans rates are often lower interest rates than conventional loans, and many times you can negotiate the interest rate with the lender. There are no mortgage insurance premiums on VA loans, and assumable mortgages are permitted. Closing costs can be lower than other forms of financing, and there is no penalty for prepaying your mortgage, as in some other forms of loans. In addition, VA assistance is available to those who qualify if temporary financial difficulty occurs.

The basic entitlement of a VA loan is $36,000, but some loans are eligible for $60,000 if they are over $144,000. A lender will often loan up to four times the amount of the basic entitlement without requiring a down payment.

Limit increase! Although there is no set maximum limit the VA allows you to borrow with your entitlement, most lenders and financial institutions will not approve a total of over $417,000. Lenders typically sell VA loans in a secondary market, where the cap for a loan limit is $417,000.

Veterans who have already taken out a VA home loan in the past may be eligible for remaining entitlement for any unused previous balance. Because entitlement amounts have increased over time, many people with prior VA loans may be eligible for more money now than they were previously. Complete our form or call us today to find out if you qualify.

Who qualifies?Criteria to qualify for a VA loan:

• Active-duty veterans discharged during WWII or later, without the status of "dishonorable"
• Active-duty veterans with at least 90 consecutive days of service during major conflict
• Peacetime veterans and active duty personnel with at least 180 days of consecutive service
• Enlisted veterans whose service began after 1980 or officers whose service began after 1981 and who have served at least 2 years.

Construction Loans
These are loans used when you buy land and want to build a house on it. They are usually variable-rate loans priced at a spread to the prime rate or some other short-term interest rate. You, the contractor and the lender establish a draw schedule based on stages of construction, and interest is charged on the amount of money disbursed to date.

Another variable in construction loans is how much of the project cost the lender is willing to lend. If you already own the land, then that can be considered as equity on the construction loan.

Many homeowners use construction-to-permanent financing programs where the construction loan is converted to a mortgage loan after the certificate of occupancy is issued. The advantage is that you only have to have one application and one closing.

Depending on your view on interest rate trends, you could also purchase a rate-lock agreement valid through the expected completion of the construction. Just make sure you allow for the inevitable construction delays.

A construction loan, unlike a mortgage, isn't meant to be around for a long time. If you're taking out a $200,000 construction loan for six months and you pay an extra 0.5 percent on the loan, it costs you an additional $250. (Assumes an average $100,000 loan balance over a six-month construction period.)

You may be willing to pay a higher rate on the construction loan if you're doing construction-to-permanent financing and can get better mortgage terms or a longer, better rate lock from that lender.