A guide to HFA loans in 2021

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People interested in buying a house those who do not believe they have the financial resources to do so may consider going to their local Housing Finance Agency.

HFAs, as they are called, are government-established organizations that offer prospective low- to moderate-income home buyers the opportunity to purchase a home with lower upfront costs and monthly payments.

“The HFA loan is especially important for first-time home buyers… It aims to make the process more accessible, ”says Nicole Christofferson, broker and founder of NMC Realty, a real estate company based in California. “With a loan, you have the option of making lower down payments, sometimes up to 3% of the purchase price, as a result, your monthly mortgage insurance premiums may decrease and you may be able to get financial assistance for your down payment in the form of a loan or grant. “.

Read on to find out more about this government-supported aid program that helps people become homeowners who might not otherwise be able to afford it.

What is an HFA loan?

HFA loans are offered through a partnership between Government Housing Finance Agencies (HFA) and Fannie Mae and Freddie Mac, which are federally backed mortgage companies set up by the US government. HFA loans were intended for first home purchase affordable for people with low and middle income. They are often confused with FHA loanswhich are loans offered by the Federal Housing Administration for low and middle income borrowers. The programs are similar but have different benefits.

HFA loans offer borrowers lower monthly payments, closing assistance and help with initial payments.

How HFA Loans Work

Freddie Mac and Fannie Mae each offer their own HFA loan option. Fannie Mae offers Preferred and Freddie Mac offers Advantage. Both variants common, fixed rate mortgage, and the down payment is at least 3%. With these loans, home buyers are required to pay private mortgage insurance (PMI)but this is canceled when they pay off the mortgage up to 80% of the value of their home.

Professional advice

If you are interested in getting an HFA loan, get ready to do some research. Find a local agency, review their requirements, and then get an application form.

While HFA loans are good for first-time home buyers, they are also offered to those looking to refinance. Fannie Mae’s preferred option has the ability cashing refinancing

“The process is similar to other types of mortgages,” says Jason Helios, a real estate agent at Community Choice Realty in Michigan and author of Think Like a Realtor. “The start-up costs and monthly mortgage insurance are generally lower compared to other types of loans. The application is filled out in the same way as when obtaining any other form of mortgage. “

Who is eligible for an HFA loan?

You will have to do a bit of digging to find out if you qualify as income requirements vary from state to state.

“Each local home finance agency has its own rules, so it is important for borrowers considering HFA loans to contact their local agency before taking out this type of loan,” says Michael Fogut, founder Fogut Financial Group, financial planning service.

For example, in Connecticut, your gross income must not exceed 80% of the median income in the area you buy from. But all states are different.

You must have a credit rating of at least 620 and you may be required to provide your tax return… Proof of income is also required to confirm your ability to make monthly payments.

How to apply for an HFA loan

If you are potential home buyer interested in an HFA loan, start by finding a local HFA agency. Browse its website and review its requirements. Then contact the office.

“They will give you the forms you need and point you to their approved list of creditors who can start the process,” says Helios. “The rest is like getting a regular mortgage.”

What are the rates for HFA loans?

Those who are eligible for HFA loans can look forward to lower rates than regular mortgages. For example, on August 16, mortgage rates offered by HFA Connecticut were about 0.3% lower than national average… Potential home buyers, again, will need to inquire to find out what rates they can get.

“The rates on HFA loans differ depending on the program and the borrower,” says Christofferson. “It is always important to contact your local agency for further guidance. As is the case with most loans, as a rule, the higher the credit rating and the higher the down payment, the lower the loan rate will be. “

Alternatives to an HFA loan

“When it comes to mortgage programs, there is no one size fits all solution,” says Christofferson. “What’s best for one customer may not work for you. It’s wise to compare your options. “

If you are not eligible for an HFA loan or would like to compare it to other options, here are a few other government agencies that offer assistance to potential home buyers:

FHA

Federal Housing Authority (FHA) The loan is intended for people with low and middle income. FHA loans allow for a down payment of 3.5% and are suitable for those with a lower credit rating. A credit rating of at least 580 or 10% is required to participate. In the case of an FHA loan, your down payment may be a gift from a family member. This type of loan is popular with first time home buyers. With this loan, you must pay PMI

Veterans Affairs

VA credits intended for veterans, military personnel and surviving spouses. This type of loan offers minimal or no down payment, low interest rates and does not require mortgage insurance.

USDA

This is another type of loan designed for low and middle income buyers. USDA loans are backed by USDA and offer no down payment and low interest rates. Homes must be purchased in “rural” areas, which the USDA defines as an area with less than 20,000 people.

HouseReady

HomeReady is provided by Fannie Mae and, like the HFA loan, is for low-income buyers. A minimum of 620 credit points is required and this loan offers a 3% down payment option.

Possible home

Home Possible offers Freddie Mac and is aimed at low and low income borrowers. It also offers a down payment of 3%.

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