New Homes Magazine: Relaxed Guidelines on Community Mortgage Programs

Relaxed Guidelines on Community Mortgage Programs

by Robin Root, Broker Associate & Branch Manager. Platinum Mortgage

Over the past decade lenders have been very creative with financing options. From the year 2000 until now the California housing market has been unstoppable. With home prices increasing faster than household incomes, some families have simply been priced out of the market. This year, lenders have released the new “community” mortgage programs which offer relaxed, agrressive underwriting guidelines never before available to home buyers. This is great news for families who have wanted to purchase but could not qualify. Here are some of the benefits of the new mortgage programs.

The new “community” mortgage programs are offered to borrowers who meet one of the two following criteria:

100% of median income for the county they will purchase in.
OR
The property is located in the designated census tract allowed for the county.

If the borrower’s income is over the 100% of the median, they will still qualify for the program if they purchase in the designated area. Home buyers can call their lender with their income and county to find out the specific maximum income allowed. If they exceed the income they can then ask for a list of the designated areas in that county and start looking at homes.

Down payment is always an issue for new home buyers. With these new programs, there is no down payment required. Lenders will allow 100% -105% loan-to-values on these mortgages. Buyers can use DAP’s (down payment assistant programs) with both hard and soft second mortgages. Below is an explanation of the differences between the second mortgage options:

Hard second mortgage – the second mortgage is paid back to the lender with a percentage of interest charges.
Soft second mortgage – the second mortgage is deferred and/or forgiven with no interest charged.

Lenders are allowing money for closing costs to come from the DAP’s and or gift money. There are no reserves required for this program, so buyers can move in with $500.00 total out of pocket expenses.

The most common way home buyers are choosing to structure these loans is the 80/20 combination loan package. This loan is comprised of an 80% first mortgage and a 20% second mortgage. This type of combo financing allows borrowers to avoid paying mortgage insurance, which is not tax deductible and insures the lender, not the home buyer. The 80% first mortgage is offered on two amortization schedules for the buyer’s payment convenience.

30- year fixed principal & interest – no balloon payment
40- year fixed principal & interest, for a lower payment – no balloon payment

The 20% second mortgage is offered at very low mortgage rates on a 30/15 loan. The loan is amortized over 30 years for a lower payment, but due and payable after 15 years with a balloon payment. The rates offered on this second mortgage are extremely low in comparison with other 100%LTV second mortgage competitors.

The most aggressive part of this program is the best part. Underwriters are allowing borrowers to have a 60% DTI (debt-to-income) ratio. Unit now this relaxed guideline ratio has been unheard of in the mortgage industry for 100% LTV, first time home buyer programs. Buyers are now able to qualify for homes that a few months ago were out of their price range. Current home buyers are also allowed to get cash out of their homes to 95% LTV. The minimum credit score required for this program is 620— buyers falling below this score can be underwritten on an exception basis.

It has never been easier to purchase a home in California. Lenders know how hard it is for Californians to save money for a down payment on a home. Income and wages have not been able to increase as quickly as home prices. This aggressive mortgage program can allow you to purchase a home today, instead of trying to save money or wait for a pay raise to qualify. Call your lender today to find out if you qualify for the new community mortgage programs.

Robin Root, broker associate and branch manager of Platinum Mortgage, has over 15 years experience in residential mortgage loans and is a Real Estate Broker, California Department of Real Estate license #01103509. Platinum Mortgage offers a wide variety of loan programs and services including: Conventional, Jumbo, Interest Only, Stated Income, No Doc, 100% LTV, Zero Down programs, 2nd & HELOC’s, and much more. Contact Robin at (888) 399-5577 or via email at rrloans@pacbell.net. www.RobinRootLoans.com