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Profile picture for huskyfan23

Is FHA my best option?

I have good credit (FICO 780+) but do not have a down payment. I read that you can put your first time home buyer credit toward the down payment with an FHA loan. I'm looking at spending ~$170k. With FHA I would have an MIP.

My other option is an 80/20 (or 100% financing... if that even exists anymore). With an 80/20 I would be paying more in interest (2 loans), and with 100% I would have PMI.

What's the best choice for me?
  • January 06 2010 - Bridle Trails
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Answers (13)

Profile picture for huskyfan23

http://www.federalhousingtaxcredit.com/faq1.php#20

HUD is now allowing "monetization" of the tax credit. What does that mean?

It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under HUD's guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

  • January 06 2010
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Profile picture for wetdawgs
Huskyfan23: the key phrase in the quote is "are allowed to".  This phrase doesn't mean they will, or that they must, simply that they are allowed to.  It turns out that it is a rare lender who has decided to lend the borrowers this credit money.

80/20 financing is a thing of the past.   I don't think Bridle Trails is in the area where USDA financing is allowed, and there is an income limit for USDA financing.

With FHA, one can be gifted the 3.5% down payment but this must be a true gift and not a loan in disguise.  
  • January 06 2010
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80/20, 100% one loan options are not available any more, this died in the later part of 2007. Currently conventional financing aka Agency aka Fannie or Freddie requires a minimum 10% down for all single family purchases (only 5% of this can be a gift and the rest must be sourced and seasoned as liquid borrower funds. With that said a lot of lenders still have difficulty acquiring MI without showing or proving additional liquid reserves in the borrower's bank acct. Your score must remain above a 740 for this option. USDA has income limits used to qualify and the property itself must fit into rural requirements. Very politely put at this point your only option may be FHA unless you want to wait 6-12 mos. to build up some liquid assets and a portion of down payment. But keep in mind that at this point you don't want to miss the beauty of a perfect buyer's market - LOW prices / LOW rates. FHA requires a 3.5% down pmt on all purchases which can be accepted as a gift from a relative, no more interested parties allowed. With your scores of roughly 780 your UFMIP and monthly MI should be calculated at nominal rates. Bottom Line = go FHA- no reserve requirement, get 3.5% min down payment as a gift from relative (be prepared to paper trail relationship), get incredible rates.  Speak with your accountant regarding home tax credit as there are income limits. Best of luck!
  • January 07 2010
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Just a few more things to add for you huskyfan. 

1) Yes HUD does allow access to your tax credit up front, BUT only through an approved HUD non profit lender and Washington State does not have one that is participating in this program. So that is not an option.

2) USDA is a great option, no money down and no monthly mortgage insurance. Just 2% up front MI and you're done. There are income and property limits. Visit their site to check a property and check out income limitations for your area: USDA Single Family Site.

3) FHA would be your other option, like the other posters said, it requires 3.5% down and both monthly and up front MI, but the down payment can be all gift and there are no income or property location limitations.

Good luck to you!
  • January 07 2010
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Profile picture for SunTrust
Currently conventional financing aka Agency aka Fannie or Freddie requires a minimum 10% down for all single family purchases.

the current requirement is 3% (with restrictions) to 5% down.
  • January 07 2010
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I don't believe you will have much luck with 80/20 loans anymore.  It is difficult to find a lender that will allow a 2nd mortgage up to 100%.  In regards to FHA or USDA, they both usually require 3.5% down.  There are some types of FHA and USDA products that will let you go to 100%.  These are rare and are usually set up for certain areas, income levels, sometimes ethic background such as Native American, etc. 

You are correct however that if you do need 3.5% down, some lenders will allow you to use the tax credit.  I have heard that this is VERY tough though.  The best way to do this would be to save enough money or obtain a "gift" from a relative, etc.

You may also want to consider Key Bank.  I have a connection there that said they can do 100% financing in certain areas (moderate/low income areas).  There are some restrictions that go into it but it is worth a shot.
  • January 07 2010
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Profile picture for Memphis Owners12
There are some programs that allow you to use your tax credit upfront.  For example, here in Tennessee, we have the THDA loan, offered by the TN Housing Development Agency.  It's an FHA loan underwritten to THDA's guidelines. 

USDA is a fantastic option for a true, no-money down loan.  My website shows all the eligible areas for MS, TN, and AR (I don't know where you're located).

Side note-- there is no PMI with an 80/20 loan.  That's why they were so popular a while back.  However, PMI has been tax-deductible since January 1, 2007.
  • January 07 2010
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HuskyFan....the lenders here are doing a great job of giving you information about the loan....but there is a little more you need to consider when it comes to writing an offer.

Right now the $8,000 tax credit is bringing a LOT of buyers out to get the good deals...so there is REAL competetion between buyers for the best homes.

No matter which financing you choose, get COMPLETELY preapproved...ask for a Desktop Underwriting (DU) approval is possible.

The stronger your offer looks (financially) the better chance you have to get the acceptance from the seller.

Here is a resource for first time buyers that may answer more questions.

Good Luck!

Bob Davis

  • January 07 2010
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It depends, there are other options to be considered. Consider many of the regional assistance programs, such as county economic development programs.  Also, VA loans are a great option, and depending on the sales price, it's a great option for 100% financing.  You just need to know if your client is a vet.
  • January 07 2010
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Have you spoke directly with a lender that show your the various loan programs available to you? There is USDA which is 0 down, although the properties through USDA are usually rural. So depending on where you want to purchase will be the key.

3.5% down with FHA, this money can be gifted to from anyone outside the contract or involved in the transaction i.e. parents gifting you the money etc.
  • January 07 2010
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Profile picture for daveskow
Q: I have good credit (FICO 780+) but do not have a down payment. I read that you can put your first time home buyer credit toward the down payment with an FHA loan.....

A:some states allow this ...Wash St doesnt 
....
Q:I'm looking at spending ~$170k. With FHA I would have an MIP.
A: yes " MIP "  is involved with FHA loans

.....
Q:My other option is an 80/20 (or 100% financing... if that even exists anymore). With an 80/20 I would be paying more in interest (2 loans), and with 100% I would have PMI.

A: these 100% loan programs are no longer available
  • January 07 2010
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Profile picture for huskyfan23
Thanks for all the great advice! USDA is out of the question for any surrounding cities. I can probably come up with a down payment to meet the FHA requirements, so I guess now I have to find a good lender.
  • January 07 2010
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Hi Husky Fan

In Bellevue there is a HomeKey program that will use FHA and do 100%.  Rates are higher but it could be the only option.  Look up Jeff McGinnis, he is a local Bellevue lender and a Zillow quoter.  He is certified on this program and does many.  There are different qualifications and limits so you will have to see if you qualify.  Usually the biggest issue is making too much money in that zip code.
  • January 18 2010
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