One of the biggest reasons holding people back from becoming homeowners is lack of funds, specifically to cover the cost of a down payment on a loan. Luckily, there are several assistance programs available to help people in those financial situations become homeowners by covering the required down payment. If you’re in a tight financial situation, make this the year you become a homeowner by checking out the Chenoa Fund Program.
What is the Chenoa Fund Program?
The Chenoa Fund Program assists borrowers who lack funds by helping them finance the down payment requirement of an FHA loan, which is 3.5%. It essentially combines the ease of an FHA loan with a grant or second mortgage to cover the 3.5% down payment requirement, meaning you receive could receive up to 100% financing.
There are three different options to choose from based on your income. If your income is the same or less than 115% of your area median income, you might be eligible for a different program than if your income exceeds 115%. Let one of our Mortgage Loan Originators help you determine if and for what kind of assistance you may qualify.
Like any loan option, the Chenoa Fund does have a credit requirement. You must have a minimum of 620 FICO score and all additional FHA loan criteria must be met. In some instances, a non-occupant co-borrower is allowed.
As a homebuyer, you should research and discuss with your lender all the possible loan and program options available to you. If you’re thinking an FHA loan might be right for you, talk with your lender about the Chenoa Fund Program. Being unable to fulfill a down payment requirement is no longer a reason to stall your dreams of becoming a homeowner.
For more information about this program, other loan options, or the homebuying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!
If you are in the market for a new home, one of the first things you should consider financially is how much of a down payment you can make. Most home buyers know that the most common mortgage loan (a Conventional loan) requires 20% down payment. This means that if you purchase a home worth $200,000, you must have $40,000 cash available, on top of the closing costs needed to purchase the home. This may deter many potential home buyers from purchasing because they only have a small amount of money saved. However, Conventional loans are only one of the many loan options available. Here are five of the most widely used mortgage loans and their down payment requirements.
FHA Loan – 3.5% Down Payment*
A Federal Housing Administration (FHA) loan is a mortgage loan that is insured by the government’s Housing and Urban Development (HUD) agency. FHA loans require a 3.5% down payment for purchases and it typically offers very competitive rates compared to rates from a conventional loan. Due to the low down payment, FHA Mortgage Insurance Premiums (MIP) are required in order to protect lenders against losses as a result from defaulted mortgages. There is an up-front premium paid at closing, and a monthly premium that is paid along with the monthly mortgage payment. FHA has several guidelines that all loans must meet, such as loan limits, allowable closing costs, and debt ratios.
VA Loan – 100% Financing**
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans help service members, veterans, and eligible surviving spouses purchase a home with a competitive interest rate, limited closing costs, no Private Mortgage Insurance (PMI) requirement, and often without a down payment (as long as the sales price doesn’t exceed the appraised value). This is because VA guarantees a portion of the loan, which allows the lender to provide favorable terms. VA loans have several guidelines that all loans must meet, such as eligibility and loan limits.
USDA Loan – No Money Down†
A USDA loan is a mortgage loan guaranteed by the United States Department of Agriculture (USDA). With a USDA loan, home buyers can purchase a home in eligible rural locations with no down payment, and can finance up to 100% of a home’s appraised value, plus closing costs. For eligible borrowers, USDA loans often come with the lowest interest rates and program insurance premiums of all government-backed loans. USDA loans have several guidelines that all loans must meet, including property eligibility and income eligibility.
80-10-10 Loan – 10% Down Payment
Also known as a Piggyback loan, an 80-10-10 loan is a great option for home buyers who have great credit but lack capital, and wish to avoid paying PMI. The mortgage loan works by having 80% of the property value covered by a first loan, 10% of the property value covered by a second mortgage which carries higher interest rates than the first conventional mortgage, and 10% will be covered by the home buyer’s down payment. Loans that are 80% or less of the home value do not require PMI.
State Bond Programs – Specific Assistance
Several U.S. states offer state bond loan assistance programs. These bond programs aim to help first-time home buyers or buyers with low capital by providing below-market interest rates, down payment assistance, long term affordability, and/or other benefits specific to the programs. These loans have program-specific income and occupancy requirements, and limitations.
There are many more mortgage loan options available not mentioned but these are the most commonly used. If you are looking to purchase a home soon, make sure you speak with a licensed mortgage loan originator. Choosing a down payment option is a big decision and a licensed mortgage loan originator can help you find options that best fit your needs. They can also walk you through the loan process and explain to you all of the eligibility requirements for the loan you choose.
*LTV’s of up to 96.5% for FHA loans. **Veterans Affairs loans require a funding fee, which is based on various loan characteristics. †100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable.