Low Rates And Down-Payment Subsidy? This Mortgage Program Might Be Right For You
Today, I will introduce to you a special kind of mortgage––the HFA loan. But don't confuse it with an FHA loan. Please check out my previous article about different types of mortgages.
What is an HFA mortgage?
HFA stands for Housing Finance Agency. Every U.S. state has its own HFA, whose job is to help residents in the state solve housing problems. One of the main tasks of HFAs is to provide housing loans to residents of the state, and that’s the HFA mortgage we’ll be talking about today.
Since the main purpose of HFA mortgages is to help people buy a house, they usually offer many discounts compared to ordinary mortgages. You can search the name of your state plus "housing finance agency" to see what the policy is like in your state, since it can be slightly different depending on where you live.
Here is California HFA website.
Some people may be concerned whether HFA mortgages have higher interest rates. It’s actually the opposite. The interest rates of HFA mortgages are typically lower or similar to ordinary mortgages. Of course, the exact number will be affected by the borrower's credit score, down-payment, and debt to income ratio.
Down-payment Assistance
HFA mortgages typically offer subsidies to help homebuyers with the down payment. Each state has its own down-payment assistance program.
Some states allow homebuyers to apply for a separate loan at the same time with their mortgage, which can be used to cover the down payment and closing cost.
Other states, such as Virginia, give qualified homebuyers subsidies worth 2% to 2.5% of the house price, which doesn’t need to be repaid.
In California, the HFA provides a down-payment subsidy worth 3% to 3.5% of the house price–– capped at $15,000––depending on the different loan programs. The repayment of this subsidy can be deferred to much later.
Who is eligible to apply for HFA mortgages?
Most would say people with lower income, and that is correct.
But HFAs’ income requirements are usually not very hard to meet. For example, in some northern counties of Virginia, the income requirement for households with fewer than two people is no higher than $138,200. In California, depending on where you live, the minimum requirement of annual income can be no higher than $150,000.
To apply for HFA mortgages, homebuyers also need to make sure that the house is occupied by the owner instead of rented out.
The borrower typically needs to be a first-time homebuyer. But if you have not owned any property in the past three years––even if you’ve bought one in the past and then sold more than three years ago––you will also be eligible.
Lastly, the borrower needs to attend the home buying seminars provided by the state. These seminars can help you learn about the useful resources and mortgage policies of your state.
How do I apply?
If you’re interested in applying for an HFA mortgage, you need to first look for a mortgage broker approved by the HFA in your state.
You can find a list of approved mortgage brokers on the HFA website of your state. The aforementioned seminars will also provide such information.
Note that some states do not allow HFA mortgages to be refinanced or paid off ahead of schedule. Make sure to ask about the detailed regulations before taking out a loan.
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