June 5, 2018, 7:50 am

5 Affordable Home Loan Options

by: The Financial Blogger    Category: Personal Finance
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In today’s economy, it might seem like home ownership is out of reach for any but the rich, or at least “well to do,” but the fact is, there are home loan options that are practical for even those with relatively low incomes.

And many of these loans don’t require perfect credit, a large down payment, or a long, grueling application process either. Exploring your home loan options and taking advantage of the best program available that fits your needs can make the process simple and convenient.

Here are 5 of the most popular home loan types that work well for those with low to moderate incomes:

1. FHA Loans

FHA (Federal Housing Administration) loans used to be only for those with high incomes and great credit scores. But those days are long gone. It’s’ fairly common nowadays to get an FHA loan approved for manufactured home – and manufactured home loans can be tailor made to make them eminently affordable.

You can take out an FHA loan with only a 3.5% down payment, a FICO score as low as 500 (if you can explain the reason), and with relatively low income if it’s reliable. Single family, multi-unit, manufactured, and mobile homes can all qualify. So long as a bank underwrites the loan and it’s structure meets FHA standards, you can be in your new home in short order.

2. Rural Housing Loans

Despite the name, rural housing loans (USDA rural development loans), are also available for the suburbs and small towns. They are specifically targeted at low to medium income families (up to 115% of local area median income qualifies.)

Special advantages of these loans include: you can lump in home repairs/upgrades with the loan principal, your PMI fee is the absolute lowest of all loans (.35%), and there are zero “surprise fees” due at closing.

3. Home Renovation Loans

A home renovation loan (FHA 203k) is a mortgage that lets you buy a house to then immediately fix it up and make it more livable. It only requires 3.5% down and is very similar to standard FHA loans (#1 above).

However, you will need to borrow more than the purchase price to cover renovations, which means this loan type requires good credit, though not extremely high income, to get approved.

4. VA Home Loans

If you are a US Armed Force member or your deceased spouse was, then you will qualify for a special no money down VA loan. If you’re an honorably discharged vet who served a minimum of 6 years, you also qualify.

You will not have to buy mortgage insurance to get approved (though it’s still a good idea if you can afford it). Imperfect credit is not normally a problem with VA loans, and even bankruptcies won’t necessarily disqualify you.

5. HomePath Mortgages

HUD’s HomePath mortgage program is offered through Fannie Mae and is widely available to low-income families all over the US.

This loan type adds in the incomes of all who will live in the house, even though not all will be on the mortgage. It thus raises your DTI (debt to income) ratio and makes approval easier. This is for purchase of HUD homes only. It requires only 3% down and gives you a 3% bonus credit to use for closing costs IF you complete the “homebuyer education course.”

There are other affordable home loan programs out there too, but these 5 are easily the most common. Most people will be able to qualify for one or more of these loan-types, making home ownership truly realistic.

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