I attended a government loan seminar yesterday and picked up some interesting information I thought I would share…
Advantages of an FHA Mortgage
– No reserves are required to qualify
– Lower monthly mortgage insurance
– Lower closing costs and no “junk” fees allowed
– Gift money is allowed for your entire downpayment
– Generous debt to income ratios are allowed (sometimes up to 49%)
– Lower credit scores considered (a FICO score as low as 605 was accepted by this broker)
– No first time buyer requirement
– No income limits
– No purchase price limits
– Non-occupant co-borrowers are allowed
– Sellers can contribute up to 6% of the closing costs
Disadvantages of an FHA Mortgage
– Upfront mortgage insurance premium
– No restriction on points charged
Advantages of a VA Mortgage
– Lower credit scores considered (a FICO score as low as 605 was accepted by this broker)
– No reserves are required to qualify
– Gift money is allowed for your entire downpayment
– No montly mortgage insurance premium
– No first time buyer requirement
– 100% financing available, typically up to $240,000 (however, the broker had seen 100% financing accepted up to $417,000)
– No income limits
Disadvantages of a VA Mortgage
– There is a funding fee which varies based on the downpayment
– Cannot have unmarried co-borrowers
Advantages of a CHFA Mortgage
– Lower interest rates than conventional mortgages (rates are set weekly)
– Lower closing costs (1% of the mortgage amount)
– 100% financing available
Disadvantages of a CHFA Mortgage
– Only available to first time buyers, unless you have not owned in 3 years, or are buying in a targeted area
– More paperwork
– Purchase price limits
– No non-occupant co-signers allowed
– Potential for a recapture tax
The recapture tax would be either 50% of your home sale profit or 6% of the sale price, whichever is lower. All 3 of these things must happen in order for the recapture tax to be invoked- you sell your house within 9 years, and your income increases dramatically, and you make a profit on the sale of your house.
With each of these mortgages, the property you are purchasing must be owner occupied. These government loans cannot be used for investment properties.