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Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

The VA home loan benefit is called an entitlement.

VA guaranteed loans are made by lenders and brokers to veterans for the purchase of a personal home. The guaranty means the lender is protected against loss if you fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable terms.

With a VA loan you finance 100% of the purchase price as well as the funding fee.

A note to the borrower: There is usually quite a bit more paper work involved in processing a VA loan. There are extra disclosures that need to be signed along with stricter underwriting guidelines. They may require letters of explanations for various items on credit reports etc…

The guarantee is called the VA Funding Fee. It’s a percentage of the loan amount and can either be paid at closing or added to the loan amount.

Although you are paying for the funding fee you are getting a lower rate in exchange. This means over the life of your loan you could save thousands of dollars over other conventional loan programs.

Editors Note: Due to the mortgage and credit crunch, Super Jumbo loans are more difficult to obtain. If you’re in need of a super jumbo mortgage in Denver, CO contact us to discuss your mortgage options.

Super jumbo loans are conventional home loans that exceed $1,000,000 (one million dollars)

The majority of super jumbo loans over 2 million dollars require at least two appraisals of the property being financed or refinanced.

The rate on a super jumbo mortgage is higher because the investor is taking on more risk. The risk of default on a super jumbo loan can more greatly affect the lender’s overall portfolio.

Lenders can require up to 2 separate appraisals for these types of loans.

Sometimes you can split the loan up into two separate loans making a first and a second mortgage on the property to accommodate lender requirements.

Many programs exist for borrowers looking for loans over one million dollars. A few of the options are 100% loans, stated income and no ratio options.

Because Super Jumbo Loans are not eligible to be delivered to FNMA or FHLMC, and can only be sold to other investors or held as portfolio loans, they always carry higher interest rates than Conforming loans.

A super jumbo mortgage is a mortgage request exceeding $650,000. A super jumbo mortgage typically has a rate 1/4% higher than your average jumbo mortgage.

Super jumbo loans will always be a little more restrictive on what they require, however funding is always available for any size loan. What sets the lending limits apart for these loans are the higher the amount you wish to borrow, the more restrictive the lending conditions are.

With the rising costs of homes, lenders have expanded their programs to meet the demand. Even with the low start rate Option Arm, you can finance up to 8 million dollars on some programs.

Although some lenders may define these loans as only those above $1,000,000 most lenders use the $650,000 breakpoint for pricing, marketing and underwriting. Remember, the term Super Jumbo Mortgage is used to describe mortgage loans exceeding $650,000 whereas a Jumbo Mortgage refers to loans which simply surpass Fannie Mae’s limits for conforming loans. Finding the right loan officer who understands what lenders concentrate on this market is key to finding the right program.

A type of mortgage lending intended to serve borrowers who do not qualify for prime loans because of credit problems or a limited credit history.

Subprime loans that are over 80% typically don’t require Mortgage Insurance. The risk of default is already calculated in the rate.

Subprime loans are a great tool to get credit challenged borrowers into a home quickly without taking the time to clear up past credit issues. When going into a subprime loan it is often advised to opt for a 2/28 or 3/27 vs. a 30 year fixed. A 2/28 or 3/27 loan is fixed for the first 2 to 3 years then becomes an adjustable rate thereafter and offers a lower rate than the 30 year fixed. This 2 to 3 year time period gives you the time to better your situation enabling you to qualify for a conforming loan with lower rates before the rate becomes adjustable.

What’s in a name? A new term making its way in the mortgage industry in response to the term sub-prime. That new term is non-prime. Some lenders believe that calling a loan category “sub” is demeaning and turns off prospective credit challenged borrowers. The term non-prime suggests a less derogatory connotation and may be more viable as a marketing term.

If you do need to borrow over 80% over your home’s value, let us know and we will compare your total monthly payments with PMI on a prime or Alt-A program and without private mortgage insurance on a low rate subprime program for people with fair credit.

Subprime lenders are great for getting first time home buyers, with or without good credit, into a home. Subprime lenders also help borrowers with excellent credit that have other problems getting financed like, proving income, loan to value etc.

These are mortgages offered that allow for credit problems, higher loan to values, higher cash out amounts, no PMI insurance. They also have looser underwriting guidelines, ignoring charge offs, judgments and collections. Also underwriting turn around times can be much faster. Sub-prime mortgages were designed for those people who don’t fit into the small box that conventional underwriting allows for. With a Sub-prime mortgage you can secure a loan with credit scores as low as 500. Obtain no income verification loans with scores as low as 600. In many cases you can combine your first and second mortgage, secure a lower rate, avoid private mortgage insurance and save hundreds of dollars per month.

Mortgage brokers are usually the only source for subprime loans, as these loans are almost never offered by neighborhood banks. Most mortgage brokers have a network of mortgage banks that offer loan programs for all sorts of unconventional situations.

These types of loans are available to help borrowers with past credit history obtain mortgage financing. They are usually put in an ARM loan, fixed for a couple years so they can begin with a lower rate. This gives them time to work on their credit and ultimately refinance into a loan with better terms

Subprime lending refers to the extension of credit to persons who are considered to be higher-risk borrowers. In lending parlance, their credit ratings are “B” or “C” rather than “A” or “A-”. Lenders typically price subprime loans to borrowers at rates of interest and points and fees slightly higher than conventional loans.

Lenders feel that people who have not handled credit well in the past are at a greater risk of failing to repay their loans. Standard-priced loans are typically made to people with good credit history because their past record proves to lenders that they are at low risk of default.

Subprime lending offers many choices today. You can now get a home loan with credit scores in the 400’s, have late payments, bankruptcies, foreclosures, but all will reflect the interest rate that you will receive.

Subprime lenders are a huge asset to the population of people wanting to purchase homes that don’t fall under normal underwriting guidelines. Many people would not be able to purchase their dream home without Brokers providing these types of loans consequently causing less sales in the market place and a slower economy. Fill out the online form today and get started on your home search.

Loans to borrowers whose credit is less than perfect will almost always be subprime loans. There are also other circumstances that lead to subprime loans, including high outstanding debt, unproven income, etc. Even borrowers with good credit may receive subprime loans for a variety of reason, including lack of verifiable rental history or liquid cash reserve requirements.

One solution if you have a low credit score is to purchase the home with a sub-prime lender and then clean up your credit score. Once the bad credit score is improved then refinance the home with a lower rate.

Especially when borrowing more than 80% of the value of your home, the slightly higher rates which lenders charge borrowers who have less than perfect credit are more than made up for by the savings the borrower receives by not having to pay for Private Mortgage Insurance which would have been required of a borrower with perfect credit.

Do you feel you are a subprime borrower? I can understand how this can be intimidating and I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

First time home buyers may opt for subprime loans when they have little savings. Typically the asset requirements for subprime loans are not as strict as prime loans.

Common subprime candidate could possibly be Bankruptcy, Foreclosure, or major Credit Card Debt. Consult a Mortgage Professional so they help you obtain a home with little money down even carrying these difficult charges against your personal history.

Subprime is not for just poor credit borrowers. Any time you go over 80% loan to value, you get non prime rates.

The key to getting a sub-prime loan is disclosure. Although you may have been turned down by a bank for a certain incident in your credit history you need to be honest with your mortgage broker and disclose all the possible occurrences in your credit history that may prevent your loan from closing. Mortgage Brokers are experts in finding the right lender to fit your needs. If anything has been omitted the lender will find it and wonder why a broker did not submit the information. Lenders do not like surprises. So, disclose everything, good or bad, from your credit history and let the Mortgage Broker find the right lender for you.

As a rule, lenders offer subprime rates to customers who have credit scores below 620. If your score is higher than that, you should be able to qualify for a better interest rate. If not, you can either accept the higher rates from lenders, or take time to improve your score by paying off some bills or resolve previous collections and charge off’s in a timely manner.

Everyone wants to qualify for loans at the lowest interest rates and with the most favorable conditions, but for those with severely blemished credit reports, the odds of doing so may not be attainable, but there may still be programs available.

Ratios used to determine whether a borrower can qualify for a mortgage. They are based on a borrowers housing expense as a percentage of income and his total debt as a percentage of income.

Debt to Income Ratio or DTI can be improved by paying down liabilities with high monthly payments compared to the balance on the account. In some cases some of your debts can be excluded from the calculation of your DTI. For example if you have an auto loan and you have less than 10 payments left you can exclude this monthly payment from the calculation thus reducing your DTI.

There are several loan types that can help you if you have a high debt ratio with good credit. One is called a No Ratio loan: The Borrower’s source of income is verified, but the income amount is neither disclosed nor verified. The second type of loan is called No Income No Asset: The Borrower’s employment, income, or assets are not disclosed or verified. A third type of loan usually associated with FHA is the Streamline loan: No income documentation or disclosure is required.

When evaluating your Debt-to-Income ratio, the Back DTI plays a more important role than the Front DTI. The Front DTI is calculated by dividing the proposed housing expenses, also referred to as PITI, by the borrowers’ total gross income. Housing expenses or PITI is defined as the inevitable expenses incurred as a direct result of owning the subject property, such as mortgage payment, property tax, hazard insurance, (hence the acronym for Principal, Interest, Taxes, and Insurance), homeowner association dues, private mortgage insurance, etc. The Back DTI is calculated by dividing the borrowers’ total monthly obligations by the total gross monthly income. Total monthly obligations includes not only the housing expenses, but also all installment debt payments such as leased/financed vehicle and credit card payments. Most lender banks would allow a borrower’s Front DTI ratio to go above 45% if the borrower has no other obligations.

Qualifying ratios also called your debit to income ratios or debt load consist of your total verifiable gross monthly income divided by your new proposed payment, all your other monthly debits such as minimum payments on charge cards, auto loan or lease payments, student loans, consumer loans, child support and alimony.

A debt to income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met. Qualifying ratios are guidelines, an excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit. Typically conventional loans have a qualifying ratio of 28/36. Usually an FHA loan will allow for a higher debt load, reflected in a higher (29/41) qualifying ratio. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner’s association dues). The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Not all monthly debts/liabilities have to be taken into consideration when determining the amount of a borrower’s recurring monthly debt obligations. Such liabilities are known as contingent liabilities. Some of the most common that may be exempt under certain circumstances are co-signed loans, court-ordered assignment of debt, and loans secured by financial assets

Many mortgage lenders have thrown those old ratios out the window, approving household debt ratios in excess of 50% of income. If over 50% of your income is going to debt service you will be forced to either live a very shallow life with little or no funds for saving, investment or enjoyment, or, worse, are headed for a financial disaster.

Qualifying ratios are only a rough guidelines and underwriters consider many variables in their analysis. Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, a substantial down payment or excellent credit history will influence the decision to approve or deny a particular loan.

There are loan programs such as No Ratio and No Doc, that will basically avoid the debt ratio calculation for you. The only one that can make this decision, is the borrower. They are the person that will have to make the payments, with or without the calculation.

Automated underwriting can also bypass the typical qualifying ratios. Automated underwriting takes into consideration credit and assets and can give approvals for debt ratios or 50,60,or 70% or more.

The front-end ratio, or front ratio, compares your monthly pre-tax income with your house payment. The other ratio that lenders look at is the back-end ratio, or back ratio. This calculates how much of your pre-tax income will payments— such as auto loans, credit cards, go toward your house payment, plus all of your other monthly debt etc. It can be useful to figure out these numbers yourself and see if the house payment you have in mind may actually cause you undue financial risk.

Many times on a refinance loan the way to lower your ratios is to pay off debt at the time of the refinance, this reduces your monthly payments and in turn, your ratios.

Some lenders are stricter about qualifying ratios than others. Just being within the lender’s debt to income ratio limits is only one aspect of qualifying for a home loan. Most lenders will consider the overall financial picture. If everything looks good, a lender may allow you to carry more debt. When shopping for a new home, it is always wise to be pre-approved, so that you’ll know specifically what price range and loan payment fits your budget. Remember to be Pre-Approved, Pre-Qualified is just not enough.

How much house can you afford? That’s what lenders want to know when making their decisions about your mortgage. If you are having trouble qualifying for a loan program because of your ratios, contact us and ask about extending the term or discussing a temporary buy down to help you qualify.

Qualifying ratios can prevent purchasers from obtaining a home however there is an opportunity to use a 40 year mortgage to reduce the payment by extending the term and therefore create a more favorable qualifying ratio calculation.

Many lenders allow debt to income ratios to go as high as 55%. Meaning the new mortgage payments plus all existing monthly liabilities can be as high as 55% of the borrowers total gross income.

On conforming loans, you can still usually get an approval even if your debt ratios are higher than the set standards. Low loan to value ratios and lots of reserves can offset higher debt to income ratios.

Although your ratios may be high you can still qualify for alternative programs with higher ratios. For the most part a lender will look at what’s reported on your credit report to determine your ratios. The best thing for you to do is consult a Professional Mortgage Broker and have them look at your credit to see where your ratios are and what you qualify for. And remember that safe secure online forms from a Mortgage Website is the fastest way to achieve this.

Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

In many cases, the borrower can avoid paying private mortgage insurance by having two loans, a first and a second. The interest on the second mortgage, though at a higher rate than the first mortgage, is tax deductible, while PMI is not.

Statistics have shown that homeowners with more than 20% equity invested in the property are less likely to default on the loan in a soft real estate market. Banks bear a higher risk when granting a loan of more than 80% of the value of the property. Therefore, Private Mortgage Insurance is almost always required by banks. Although the homebuyer often pays for the PMI premium, some banks offer loan programs where the banks pay for the premium.

PMI adds to the monthly expenses of a homeowner and can be very expensive depending on the loan-to-value ratio. While there are other methods to structure a mortgage so that PMI can be avoided. PMI nonetheless is a very useful and effective tool in helping homebuyers with little or no down payment to purchase a home. When choosing a low or no down payment mortgage, besides borrower-paid PMI, lender-paid PMI, or piggyback loans, a homebuyer should also consider other factors that are unique to his situation, such as the loan to value ratio, the number of years he intends to live in the property, the historic and expected rate of appreciation in the area where the property is located, and the current and expected future interest rate climate. All of these, amongst others, should play a role in deciding on the best mortgage loan, with or without PMI.

MIP stands for “mortgage insurance premium” and is required on FHA loans. PMI, or “private mortgage insurance,” is used with conventional loans. Sometimes homeowners mistakenly confuse MIP or PMI with additional mortgage insurance which some lenders offer. That additional insurance pays off the loan for you if you die or become disabled - MIP and PMI do not provide any such benefits for the homeowner.

PMI in some cases may be more beneficial than a piggyback loan have your lender review your situation both ways before making a final decision.

Insurance against loss provided to a mortgage lender in the event of borrower default. In most cases, the borrower pays the premiums.

PMI premium is a monthly recurring expense for the homeowner (unless the mortgage is a lender paid PMI mortgage). The premium is calculated base on the loan to value ratio (loan amount divided by property value). The higher the loan to value over 80%, the higher the monthly Private Mortgage Insurance premium. After a homeowner takes a mortgage loan with a PMI feature, there are three ways to eliminate the banks requirement of buying PMI. The obvious is to refinance into a mortgage without a PMI feature. The second way is to pay down the mortgage balance to below 75%, but this can take years to accomplish. For example, a homeowner of a $300,000 property with a $270,000 (90% loan to value) 30-year mortgage at 6% interest rate will not be required to carry PMI when the loan balance is paid down to $225,000 (75%), but it would take about 10 years to pay down to pay a 90% loan to value ratio to 75%.The third is to hire a licensed appraiser to appraise the property. If the new appraised value has appreciated enough to make the loan balance below 80%, the homeowner is no long required to purchase PMI on the loan. Take the example of the above homeowner of the $300,000 property with the $270,000 mortgage, if one year later a new appraisal shows the property has appreciated enough to support a value of $333,360, with the loan balance a year later of $266,684 and a loan-to-value ratio of below 80% ($266,684 divided by $333,360 = 79.9%) the homeowner will no longer be required to maintain PMI.

For homeowners who already committed to mortgage loans with PMI feature, the aforementioned are the only ways to eliminate buying PMI. For home buyers who are in the process of shopping for mortgages, in a low interest rate environment, a piggyback is often used to get a homebuyer with less than 20% down payment into a house. In a high interest environment, paying the monthly PMI premium may make more economic sense than paying the high interest second mortgage in a piggyback loan structure.

PMI, or Private Mortgage Insurance, is typically provided by a private company and paid for by the borrower; PMI is intended to protect the lender against loss if the borrower defaults on the loan. PMI is only required for some mortgage loans.

The most common 2 loan scenario is the 80/20 combo. That would equate to a first loan of 80% and a second loan of 20% of the purchase price. If you have the right mortgage professional working for you they will do the math on both a 100% one loan and the 80/20 combo and let you make the decision that makes better sense for you.

Your Home Value Has Increased? When making mortgage payments, most of the payments during the first few years are finance charges. Therefore, it can take 10 to 15 years to pay down a loan to reach 80 percent of the loan value. If the home prices in your area are rising quickly, your property value may increase so that you can reach the 80 percent mark a lot faster. Your property value could also increase due to home improvements that you make to your home. When your home value has increased, you may be able to cancel PMI on your mortgage. Although the new law does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing to do so. Also, be sure to ask what documentation may be required to demonstrate the higher property value. Be prepared to pay for a new appraisal.

Also called a jumbo loan. Conventional home mortgages not eligible for sale and delivery to either Fannie Mae (FNMA) or Freddie Mac (FHLMC) because of various reasons, including loan amount, loan characteristics or underwriting guidelines. Nonconforming loans usually incur a rate and origination fee premium.

With the emergence of new lenders and programs to the mortgage market on a weekly basis there is a loan program for just about anyone whether conforming or non-conforming. Just check with you online Mortgage Professional to see what you qualify for.

Conforming loan limits will adjust to $400,000 in most states in December.

A Non-conforming loan simply means a loan that is outside of the standard guidelines set by Fannie Mae and Freddie Mac (the two government-sponsored enterprises that insure loans on the secondary mortgage market). Non-conforming loans have no set guidelines and vary widely from lender to lender. But most often non-conforming loans are mortgages that have larger loan balances, require less documentation, and have flexible credit score requirements. These loans carry an additional risk to the lender and as such the rates are higher.

Non-conforming loans have less stringent rules on fees that can apply to your loan, so review the details carefully.

The demand for nonconforming loans is gaining strength at just about the right time. Its growing presence is throwing lifelines to a record number of perplexed homeowners facing higher sales prices or stiff documentation requirements.

Non conforming loans has strict loan-to-value guidelines.

Conforming loans are available now with Stated Income, Stated Assets or “SIVA”

A Non Conforming Loan is a loan with an unpaid principal balance or an unexpired term that exceeds lending limitations established by the principal purchasers and guarantors of the secondary mortgage market; the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association.

Jumbo loans are one type of non-conforming loans, due to the loan amounts exceeding the maximum limits adopted by FNMA and FHLMC. Besides exceeding the loan amount limits, loans can be non-conforming for other reasons, such as the borrower’s credit profile, income/employment situations, cash reserves, property type, etc.

Non-conforming loans typically have a higher rate and different requirements for your down payment.

Editors Note: Due to the mortgage and credit crunch, interest only loans are not readily available. If you’re in need of a mortgage broker in Denver, CO contact us to discuss your mortgage options.

An interest-only loan is a loan in which for a set term the borrower pays only the interest on the capital; the capital remains owing. At the end of the term the borrower may renew the interest-only mortgage, repay the capital, or (with some lenders) convert the loan to a principal and interest payment loan at his option.

Interest Only Loans are for borrowers who want to improve their monthly cash flow. Interest Only loans are great for borrowers who expect their home values to appreciate, homebuyers who want to afford a more expensive home, and homeowners planning on selling their home in the near future.

Interest Only Loans offer much lower monthly payments because your principal amount is not included. These programs are good if values in your area are in an upward motion.

Many interest only loans offer the comfort of a 30 year fixed rate loan with the lower payments of interest only for a period of 5, 10 and even 15 years. Interest only loans that do not have prepayment penalties often can be paid ahead by homeowners who desire to lower the principal balance whenever extra money is available. At the same time homeowners can enjoy the benefit of the low required monthly payment.

As mentioned above in a conventional loan you are paying very little towards your principal during the first few years. So if you are buying a home that you intend to improve to increase its value and sell within a few years an interest only loan could be a smart choice.

Interest only loan programs are offered on fixed rate mortgages, adjustable rate mortgages, and on negative amortization mortgages.

An interest-only home loan may also be a good option for people who expect to be in their homes for less than ten years. The average homeowner stays in their home between five and seven years. As mentioned before, mortgage payments are mostly interest for the first years of the loan. Many homeowners like the option of making interest-only payments and using the extra money as they please - save for college tuition, make home improvements.

One of the advantages of an interest only loan is the ability to pay more towards your principal every month. For example, if your refinance saves you $300.00 month, you can apply $100.00 of those savings each month towards the principal on your home. You’re still saving on your monthly expenses while lowering the balance of your loan at a more accelerated pace.

Interest only loans are an excellent tool for any homebuyer looking to minimize payments.

In addition to being utilized by investment property owners and during an appreciating real estate market, IO loans are often used by those who expect their incomes to increase in the near future, such as professionals acquiring an advance degree.

Although it may vary most interest only terms are for up to 10 years. After the initial interest only period whatever is left on the mortgage is then amortized over the remaining 20 years so you must be prepared at that time to either be able to handle the new payment or be ready to refinance your mortgage.

The payment shock experienced by borrowers in interest only loan programs as they transition from the interest only period to the fully amortized period, often at 3 5 7 or 10 years, is often substantially more than they are prepared for. In fact, many mortgage experts recommend that borrowers considering an I/O loan should have a look at Pay Option ARM loan programs as well, which can present borrowers with a much more progressive transition at the expense of possible negative amortization.

I can understand how the Interest Only option can be confusing? Yet I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

Interest only loans are excellent for investment properties. Small investors can qualify for larger loans to buy properties, including bigger properties, because the monthly payments they would owe are lower, and more manageable in the eyes of the lender. Also, this increases the monthly cash flow from rents. If you are considering an investment property, an interest only loan may just be the right loan for you.

Interest only loans can keep your payments lower but you also are not applying any of the payment towards your principal balance therefore the amount of your original loan is actually not being paid down. Thai may or may not be a big problem in building equity especially if the area you live in is appreciating well.

Many second mortgage products, particularly Home Equity Lines of Credit, are priced at an interest only payment.

The main problem in buying a home today is not income or credit requirements but finding having the funds available to cover the down payment and closing costs. While a traditional conventional loan requires a 20 percent down payment the are other options. For example, funds for the purchase of a home can include a gift from a relative or even retirement funds. There are also many other ways to get a low down payment loan.

When having the seller pay your closing costs, the seller will usually increase the price of the home beyond what they are willing to accept. That way it is really the buyer who is paying the closing costs, but is being included in the purchase price of the home.

Having a down payment for your mortgage is really a thing of the past. Today there are many 100% financing programs available that will allow you to get into a new home with little to no money out of pocket.

Another way to afford a home is to use an FHA or VA loan. Many real estate agents may try to steer buyer away from these types of loan because they feel that there is too much paperwork involved with these types of loans. However, with new changes to FHA guidelines these types of mortgages are now much easier to process, especially if you are dealing with an experienced loan officer.

You can always have the seller contribute money to pay your closing costs. This is called a seller contribution. Ask your mortgage broker how much of a seller contribution is allowed per the guidelines of the home loan program that you are obtaining a mortgage for. This will help you to afford a mortgage when money is tight.

The key to buying a home with the minimum up front funds is to have the seller pay the closing costs. Depending on the loan program you choose, the seller may be able to absorb all of you closing costs.

If you think that you will be buying a home within the next year, now is the time to start saving. Try putting yourself on a budget, and saving a little bit of money every month. Nobody likes to be on a budget, but if it gets you into a new home then it will be well worth the it.

Editors Note: Due to the mortgage and credit crunch, Low Down Payment Mortgage Programs may no longer be available. If you’re in need of a Denver Colorado Mortgage contact us to discuss your mortgage options.

Here’s no question about it: Buying a first home is a big financial commitment. In most cases, a home is the largest single purchase an individual or family will make in a lifetime. However, because of the tax advantages afforded to homeowners, buying a home also can be one of the best financial decisions you’ll ever make. Problem is, many would-be homeowners remain renters simply because they mistakenly believe mortgage lenders require that buyers come up with 20 percent of the purchase price as a down payment. While it’s true lenders feel it’s less risky to work with buyers who are able to bring a substantial down payment to the table, the standard 20 percent requirement is fast becoming a relic of the past. In recent years, lenders have become more flexible in working with first-time homebuyers by creating a variety of special programs that require only a small down payment. These programs, combined with the most favorable interest rates in two decades, have encouraged growing numbers of renters to consider the tremendous benefits of home ownership.

Private Mortgage Insurance: Most major lenders offer privately insured mortgages, which generally require a 10 percent down payment (although some lenders offer loans with a 5 percent down payment to buyers with exceptional credit). These loans typically are not limited by maximum loan amount or purchase price limitation.

While the list of programs offered by individual lenders is too extensive to mention in detail, here are some common programs you are likely to come across as you work with your real estate agent to purchase your first home: Federal Housing Administration (FHA): FHS mortgages allow homebuyers to purchase a home with as little as a 5 percent down payment, and to finance all non-recurring closing costs. The current maximum loan amount in most urban markets is $151,725. In addition, borrowers are allowed to use up to 41 percent of their gross income toward paying mortgage debt – well above the ratio allowed under most private programs.

Mortgage Revenue Bonds and Mortgage Credit Certificates: Mortgages funded with these instruments typically require a minimum of 5 percent down and have interest rates that are 1.5 to 2 percentage points below conventional 30-year fixed rates. These types of loans, offered by state and local housing agencies, are available only to first-time homebuyers. There generally are income and purchase price caps that vary, depending on where you plan to buy.

Department of Veterans Affairs (VA): VA mortgages allow veteran or active service personnel purchase home with no down payment, up to the current maximum price of $184.000. However, there is no purchase price limitation for buyers able to make a down payment. Like the FHA program, VA borrowers can put up to 41 percent of gross income toward their mortgage debt.

Clearly, there are a lot of options for first-time homebuyers. While lenders will be more than happy to share information about their own programs, you can save yourself a good deal of time by first selecting a professional loan officer who is experienced in working with first-time buyers in the areas where you plan to buy. An agent who focuses on first-time buyers will know from experience which lenders in your area offer a low down payment program that will meet your unique needs. Today, taking the first step toward owning your own home is easier than before. Your real estate agent is your best resource for finding innovative ways to help you come up with a down payment and qualify for financing. There’s certainly no need to wait until you’ve saved a 20 percent down payment!

Piggyback mortgage strategies incorporating up to 80% first mortgage and up to an additional 45% in the form of a second mortgage or equity line of credit can allow borrowers with all types of credit to own a home with no money down.

In the case of many of today’s lenders, there may not be any down payment required. Lenders are constantly looking at making more and more programs available to people looking to purchase a new home. Lenders are willing to do 100% loans, with a credit score of 560 or better. This may not be the best option, that is why it is best to know that there are several low down payment programs, that may also be available to you.

In addition there are down payment assistance programs that can help with thousands of dollars for down payment and closing cost. Most cities have grant programs available that don’t have to be paid back.

Community Homebuyer Program: Through their networks of mortgage lenders, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) offer Community Homebuyer Program loans. These programs require a 5 percent down payment, 3 percent of which may be a gift. To further help buyers qualify, applicants may use 38 percent of their gross income. Currently, the maximum loan amount available through these programs is $203,150.

A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

As far as underwriters are concerned, the Back DTI (total monthly obligations divided by total monthly income) carries more weight than the Front DTI (monthly housing expenses divided by total monthly income). In fact, some lender banks have disregarded the Front Debt-to-Income ratio altogether and look only at the Back DTI.

On conforming mortgages your loan officer can use electronic underwriting which may allow you to have higher debt ratios. Loans that have 50, 60, or 70% debt ratios have gone electronically because of loan to values, a great credit history, or a lot of assets.

Even though you may not meet the DTI requirement, some lenders will expand that limit for a small increase in rate.

Even if you do not meet the DTI requirements, there are variations that will allow you to get the needed financing. A No Ratio loan, allows you to get financing, with a small rise in the rate.

Although many lenders have programs that allow up to a 55% debt to income ratios, it is not always in the best route to take. The borrower should consider what his or her potential for an increase or decrease in income could be over several years. Discussing your short and long term goals with your mortgage broker will allow them to find a loan program that is in your best interest.

Debt to Income Ratio Your debt to income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met. Debt limit There is generally a debt limit associated with each type of loan, such as a 28/36 qualifying ratio for a conventional loan. These qualifying ratios are guidelines. An excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit. Understanding the qualifying ratio Typically conventional loans have a qualifying ratio of 28/36. Usually an FHA loan will allow for a higher debt load, reflected in a higher (29/41) qualifying ratio. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner’s association dues).The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments. For example: With a 28/36 qualifying ratio: Gross monthly income of $3,500 x .28 = $980 can be applied to housing Gross monthly income of $3,500 x .36 = $1,260 can be applied to recurring debt plus housing expenses With a 29/41 qualifying ratio: Gross monthly income of $3,500 x .29 = $1,015 can be applied to housing Gross monthly income of $3,500 x .41 = $1,435 can be applied to recurring debt plus housing expenses Simply guidelines Remember these are just guidelines. We’d be happy to pre-qualify you to determine how large a mortgage loan you can afford. We look forward to helping you buy your dream home.

This ratio, also known as “DTI”, is very important in the eyes of each Lender. Some lenders will allow your DTI to be as high as 55% making it even easier to qualify for a mortgage.

Other lenders will want to see your DTI at 40% or below and usually conforming loans will have this stipulation. Many niche programs do allow for higher DTI ratios. If you are currently looking for a loan you might want to consider consulting a mortgage broker to find out what percentage your DTI is and what programs are available.

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