4 mortgage programs you haven't heard of - yet

Ginger Dean

February 25, 2014

By: Ginger Dean, Home Finance Specialist

In: Finance and Legal

If you're buying your first home, the mortgage application process can be a bit overwhelming. From shopping for mortgage rates to choosing a notary, you may not know where to begin. Thankfully there are several mortgage programs out there for homeowners in any financial situation.

Find the mortgage program for you:

Lock in the interest rate for the long term. A 10 year mortgage gives homeowners an alternative to the traditional 30 year mortgage. This option has typically has lower interest rates and fixed monthly mortgage payments over the short term. If you have a traditional 30 year mortgage and want to refinance, consider a shorter term mortgage to take advantage of the lower interest rates.

Low down payment options. Not all home owners need at least 20% for the down payment on their new home. The U.S. Department of Agriculture (USDA) offers several mortgage programs for home buyers who have less than 20% or $0 down payment. Having a down payment on your mortgage can be beneficial because it can save you money on interest charges and lower your monthly payment amount. However, not everyone can afford to save a large lump sum of cash for the down payment on their home.

Mortgage programs from USDA are available for home buyers with less than 20% down payment, but they are not available without a price. The lower the down payment, the more risk the lender is taking on with a home owner, and that means the insurance premiums and closing costs are higher. Conventional financing is available for home buyers with a 20% down payment (80% loan-to-value) via traditional lenders.

The Conventional 97 Mortgage Program. Fannie Mae and Freddie Mac are commonly known for offering home buyers mortgage programs with a 95% loan-to-value, which equals a 5% down payment. However, thanks to the Conventional 97 Mortgage Program offered by Fannie Mae exclusively, people can buy a new home with only a 3% down payment.

The Mortgage Reports says the Conventional 97 Mortgage Program is available for all U.S. home owners and the rates are good. Sometimes the lower the down payment the higher the interest rate, but with this mortgage program that is not the case. The required 3% minimum down payment amount is based on the lower of either the home's appraised value or the purchase price. It is also important to note that this mortgage program is backed by the government.

Home owners favor the Conventional 97 Mortgage Program because the guidelines are less strict than the Federal Housing Administration (FHA) low down payment mortgage program. The FHA requires a minimum down payment of 3.5% to qualify for their mortgage loan, and that can add up to a big difference.

With this start in hand, research all the mortgage programs available to you to ensure you're getting the best value for your investment.

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