Are you or someone you know needlessly missing in action this summer, leaving near-historically-low mortgage money at 3 1/2 percent to 3 3/4 percent on the table? You might be if you fit this profile:
•You’re renting, though your goal is to buy a home. But you assume you can’t qualify for a mortgage because today’s underwriting rules are so strict and inflexible.
•You don’t have a lot of extra cash in the bank and you seriously doubt that you could scrape enough money together to afford a down payment.
•Your credit scores aren’t great — just under 700 FICO — but that’s mainly because you’re young and don’t have a deep credit history.
Sound just a little familiar? Well, here’s some good news. Giant mortgage investor Fannie Mae last week revised and improved its low down payment mortgage plan known as HomeReady. Fannie’s competitor, Freddie Mac, has a similar program known as Home Possible Advantage. Either one could be key to your getting out of your rental apartment and buying a house or condo by early fall.
Check out the basics of Fannie’s program. Start with the 3 percent down payment. There’s no minimum cash contribution requirement out of your wallet as long as you’re buying a single family house to live in. You can supplement your cash on hand with gifts from relatives or other sources. You can also increase your effective income for mortgage qualification purposes by including so-called “boarder” or in-house rental payments. Say the rowhouse you want to buy downtown has a long-term tenant in a basement unit who would like to remain in the house. That rent could count toward your income.
Another flexibility: Say you’re part of an extended family and you expect to have other household members living in the house with you who earn incomes but don’t want to be on the mortgage note as a co-borrower. You can use their documented earnings to increase the maximum debt-to-income ratio (DTI) you’re allowed on your mortgage.
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