Colorado home buyers have an assortment of home mortgage programs available in 2017. In the posting below we will discuss the latest Colorado home financing options. Everything from low down payment first time buyer programs, to high net worth Jumbo loans. Please contact us directly with any questions by calling ph: 800-871-2636
We will begin by discussing the most popular loan programs for first time home buyers.
FHA 96.5% Home Loan
The FHA mortgage has remained a popular mortgage financing source for many home buyers in Colorado, Denver in particular. Many buyers, in particular first time buyers need mortgage options that offer a low down payment FHA. In addition to financing with only 3.5% down, FHA recently lowered their mortgage insurance costs, making the home loan even more affordable for new buyers and current FHA mortgage seekers.
In addition to a low 96.5% financing, easy credit qualifying requirements and the backing by the federal government – FHA mortgages are an attractive option for many borrowers in the U.S. Donnie Simmons, FHA loan specialist, explains that FHA loans will always play a big roll in the housing market whether their costs rise or fall. Most entry-level buyers today cannot qualify for a bank conventional loans that require large 10% or 20% down payments.
Some FHA mortgage benefits:
Relax credit score and down payment requirements:
- The FHA requirements for credit score and down payments are far lower than for conventional loans. Borrowers can technically qualify for an FHA loan with credit scores of at least 580 credit score and a down payment of just 3.5 percent – according to FHA. However, while FHA-backed mortgage with FICO 580 is “available” to borrowers, many lenders and banks will add their own in-house “overlays” on these minimum credit requirements. Loans with the lowest credit scores tend to default at a much higher rate, and mortgage companies are afraid that if they issue too many loans that later fail, HUD will no longer allow them to write FHA-backed mortgages. Therefore, many buyers will find they need to have credit scores of at least 620 to qualify for the max 96.5% financing amount.
- FHA loan rates are typically the lowest 30 / 15 year fixed rates available and lower than conforming loans. FHA Borrowers with credit scores of 680 will often qualify for the same interest rate as would conventional borrowers with a score of 740 + would. In addition, they will not be required to put as much money down.
- FHA closing costs can be paid by the seller of the home, up to 6%. This is amount is generally enough to cover the buyers closing costs and pre paid escrow requirements for taxes and home insurance. This allows the FHA home buyer to put less money into the transaction. I’m some cases a borrower can just pay the down payment, and have the seller pay all closing costs.
FHA mortgage insurance premiums:
FHA loans like all government-backed home loans have a one time upfront mortgage insurance premium. The upfront mortgage insurance premium (MIP) is 1.75 percent of the loan amount. That is $1,750 on a $100,000 mortgage. That cost is added to the principal balance of your loan. So your loan amount is actually $101,750.
Secure backing by the U.S Government:
FHA loans are backed by the US government – Federal Housing Administration. The program offers safe secure fixed rate terms with no pre payment penalties. Move and sell your home anytime with without restriction. Please note this also apply to the other programs listed below.
100% USDA Rural Housing
USDA still offers 100% financing in select locations classified “rural” throughout Colorado. Be sure to check your area before automatically assuming it doesn’t qualify for USDA housing. Some locations not too far outside of Denver, Colorado Springs, Aurora and Pueblo still qualify. The USDA rural loan has many different names. It is often called the USDA Rural Home Loan, Rural Development or 502 Guaranteed Home Loan. No matter the name it all comes from the same place and has the same requirements. 100% financing is the main benefit to USDA financing. In fact, the only other mortgage program that allows 100% financing in CO is the VA home loan which we will discuss below. We will go over most important USDA lending requirements below.
USDA Mortgage Eligibility:
To be approved and eligible, borrowers must:
- Have a credit history that indicates a reasonable willingness to meet obligations as due. 620 min credit score
- Have an adequate and dependable income. A strong two-year job history is often needed.
- Be a U.S. citizen, qualified alien, or be legally admitted to the United States for permanent residence.
- Have an adjusted annual household income that does not exceed the moderate income limit established for your county. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household – EVEN IF THEY ARE NOT APPLYING FOR THE LOAN. Applicants may be eligible to make certain adjustments to gross income— such as annual child care expenses and $480 for each minor child in order to qualify. Please click here for the USDA income calculator.
- Have repayment ability based on the following debt to income ratios: total monthly obligations / gross monthly income cannot exceed 42%.
USDA Loan Advantage:
- 100% financing – Unlike most other types of mortgage financing, USDA mortgages require no down-payment which makes it easier for first time home buyers to own homes. The USDA loan is available in all 50 states, please contact us below to learn more.
- Lower credit scores possible – because USDA guaranteed loans are backed by the government, those with a “less than perfect” credit history have an easier time getting approved for a USDA loan. As of 2019 the minimum credit score needed is a 620
- Secure fixed rate terms – The USDA program is a standard 30-year fixed mortgage with no early payoff penalty.
- Easier to qualify because they’re guaranteed or backed by the federal government, lenders are more likely to offer the program.
- Attractive interest rates – since Rural Housing guarantees the mortgages against default, USDA loans usually have better interest rates than most conventional mortgage loans.
- Low monthly mortgage insurance – Monthly mortgage insurance costs is much less when compared to other FHA and conventional loan programs.
USDA Property Eligibility:
Many Colorado buyers are surprised to learn what homes are still considered eligible. Reach out to us if you would like to discuss the USDA approved area around your town. Please click this link Property Eligibility and begin your search. If you have any questions, we can help!
- Guaranteed loans can be made on either new or existing homes; Existing homes must be structurally sound, functionally adequate, and in good repair. There are no restrictions on the size or design of the home financed.
- The home must a primary home, and not be income producing (Farm, Cattle Ranch, etc)
- Homes must be located in rural areas, check the map above. The seller of the home is not important, only “where” the home is located.
- Primary homes only, no mobile or manufactured homes, or rehab project homes permitted.
VA Home Loans
The VA loan program is a home financing option for past and active Military. Not only does the program offer up to 100% financing, but it also has NO money mortgage insurance (PMI) Once military home buyers determine the VA loan is the right choice for them, they can begin the loan application process. This process involves a few steps: pre-qualifying for the VA loan, selecting your home, writing a purchase contract, getting the property appraised by the VA, and finalizing the loan.
VA Loan Advantage:
- No Down Payment: VA mortgages require $0 money down at closing – a valuable benefit that only the VA and USDA loan offer in Colorado.
- Lower Monthly Mortgage Payments: No monthly mortgage insurance means big monthly savings to home buyers, $150 per month on average.
- Easy Approval Process: VA home loans were designed to offset common financial challenges faced by military families and veterans – so approval may be easier.
- VA Closing Costs: VA has limits on what closing costs the buyer can pay. This often saves the borrower when it comes to closing fees.
Before Loan Application:
- The applicant must be an eligible veteran who has available VA entitlement.
- The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan. The loan cannot be used for investment home purchases.
- The active duty or Vet must have reliable credit – generally over 620 credit score.
- The income of the household must be shown to be enough to meet the mortgage payments, cover the costs of owning a home. VA, like all home loans, has max allowed debt to income ratios. The mortgage lender will be able to discuss specific income and other qualifying requirements.
Pre-Qualifying for VA Mortgage:
Pre qualifying for a VA loan is the best way to determine how much borrowing power you have. Pre-qualifying involves completing a VA loan application. Based on that information, you can find out if you qualify for a given loan. Note that pre-qualifying only gives an estimate of the amount of mortgage payment you can afford, based on the information you provide. While pre-qualifying is not a requirement, it is highly recommended. Without pre-qualifying first, you may find yourself looking at houses that you wouldn’t necessarily be able to afford. Once you pre-qualify, you’ll have a good idea of how much income you’ll need to qualify. You’ll also know what price range of houses you can look at, which is important for the next step.
Selecting The Perfect Home:
By now you have been VA mortgage pre approved and have a good idea of your purchase price point. You can now begin the process of selecting your new home. Finding a home can be accomplished in several ways:
- Online: There are many web pages dedicated to listing homes for sale. These pages are often useful for finding homes that are out of your travel range, and often include numerous pictures and detailed information. Places like Tulia and Zillow are great sites to research online.
- Using a real-estate agent: Many buyers use real estate agents to navigate through the paperwork involved in buying a new home. If you need assistance finding a great realtor in the area, reach out to us, we would be happy to help.
Writing Offer Purchase Contract:
Also referred to as a “sales contract” or “purchase agreement”, the document represents the finalized terms and conditions upon which the transfer of real estate will take place. A purchase contract is essentially an agreement between the buyer and seller to purchase an agreed upon property on agreed upon terms, whatever they may be. The Purchase Contract will among other things address: restrictions and easements, liens on the property, inspections, prior leases, disclosures, preparing of documents for closing, and maintenance of the property up to closing.
VA Home Appraisal:
You will need a satisfactory appraisal in order to finalize the loan, the home must be worth the sale price. It is important to remember that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. Homebuyers should hire a reputable home inspector to help give everything a close look. VA guarantees the loan, not the condition of the house.
VA Loan Closing:
If the appraisal is acceptable to all parties and the lender determines that your loan is approved, the VA closing process begins.
All parties go to the loan closing and sign the note, mortgage and other related papers. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. When the loan is reported to the VA, the Certificate of Eligibility is annotated to reflect the use of entitlement and returned to the Veteran. The loan closing procedure may vary in some states, but after the signing your loan will fund and you receive the keys!
Jumbo Home Loans
Luxury home buyers in Colorado are often pleased to learn about new Jumbo home mortgage options that permit up to 95% financing. This is great for buyers purchasing in higher costs locations of Denver, Aspin, etc that have limited cash down payment, or money tied up in other high yield investments. If you think Jumbo loans still require a large 20% down payments, please read more below. Below we discuss all the latest jumbo guidelines including credit and loan to value standards. Please contact us anytime at ph: 800-871-2636 for assistance.
Jumbo Mortgage Basics:
Like the name “Jumbo” suggests, these loans are for applicants that need to borrow amounts that exceed the conforming loan limit imposed by Fannie Mae & Freddie Mac. In most cities in the U.S. the conforming limit imposed by Fannie Mae and Freddie Mac is $453,100. However, this limit is greater in some higher costs locations around CO. Fannie and Freddie are willing to guarantee loans up to the conforming loan limit, not beyond it.
Benefits of a Jumbo Mortgage:
Jumbo loans are ideal for home buyers looking for more expensive homes in locations like Denver, Colorado Springs, etc. These loans are designed to simplify home buying in pricey markets by covering the full cost of the loan, so there is no need for borrowers to drain their cash reserves. Once borrowers qualify for jumbo loans, there is no need to take out 2 or more loans to purchase. Many options today allow for one single loan up to 95% financing, only 5 percent down payment. Also just like conventional loans, jumbo loans can be obtained at a fixed and an adjustable rate- including 15 year, 30 year fixed rates to 5/1, 7/1 ARM.
Other perks of jumbo loans include:
- No PMI (Private Mortgage Insurance) requirements.
- Jumbo financing up to 95% – 700 credit score required, $2.0mil loan amount limit.
- Jumbo financing up to 90% – 700 credit score required, $3.0mil loan limit.
- Other options available to 5 mil – will require 720 credit and down payment of 15% +.
- All the above applies only to PRIMARY, second home purchases and rate-term refinance. Financing is available up to 85% depending on loan amount for investor homes – 700 credit required.
- Fixed rate or adjustable rate terms.
- One single loan, or 80/15 combo options available.
Basic eligibility requirements for a Jumbo program
Now let us take a quick look at the eligibility/qualification requirements for a jumbo loan. To qualify for a jumbo loan, a home buyer should expect:
- Documenting income – two years of tax returns and W2’s for salary workers.
- The maximum debt-to-income ratio should not be more than 45%.
- Home buyers should have at least 6 months worth of reserves in his/her bank account after closing. The exact amount will depend on the loan amount and initial down payment. Banks and lenders like to see borrower’s reserves as it enables them to ensure that the borrower has the ability to make monthly loan payments. The reserves can be non-liquid accounts like 401K, etc. Be sure to read more and view helpful videos about Jumbo loans here.
Five Stars serves buyers throughout the U.S. including CO: Denver, Colorado Springs, Aurora, Fort Collins, Lakewood, Thornton, Arvada, Pueblo, Westminster, Centennial, Boulder, Highlands Ranch, Greeley, Longmont, Loveland, Grand Junction
Questions? Please call ph: 800-871-2636 or just submit the Request Contact form at the top of your page for quick service. Please feel free to contact us 7 days a week.