Types of Housing Loans

Different Types of Loans for Home Buyers
by Rebekah Bell

Have you heard the phrase, ‘I am not trying to break the bank’? Of course, you have. If you are in the process of purchasing a home, you may have either thought it or spoken it aloud – especially if you are experiencing the buying process for the first time.

Fortunately, there are first-time homebuyer programs available on both state and national levels.

State-level programs for First Time HomeBuyers
If you have not owned and occupied a home in the past three years, California recognizes you as a first-time homebuyer. The specifics of each of the following can vary based on the individual program. But, a consensus of the eligibility includes a credit score of at least 660. The property’s location must be in California and serve as the buyer’s primary home until sold or refinanced. The buyer must complete a homebuyer education course with an awarded certificate.

MyHome Assistance Program
MyHome Assistance Program’s loan amount is limited to 3.5% of the purchase or appraised amount, whichever is lower. It is capped at $10,000. The program is available to low to moderate-income families for down payment or closing costs assistance. This loan classifies as a subordinate loan, meaning the payment is deferred until the home is sold, refinanced, or paid off. This program is generally allowed to be combined with other assistance programs.

CalHFA Zero Interest Program
This program is compatible with the CalPLUS Conventional and CalPLUS FHA loans. This program is designed to help accommodate closing costs, lowering your out-of-pocket expenses through a second, interest-free loan. Payments are deferred as long as you live in the home but required to be paid in full in the event of any of the following: you sell, refinance, transfer the title to someone else, or default on loan.

In addition, it is equally important to consider national programs. Some programs may allow you to combine the resources, pending approval.

National Programs
The following programs are available by most lenders and tend to offer affordable down payment options.

Conventional Mortgage Loan
This loan isn’t insured federally and adheres to the guidelines of Freddie Mac and Fannie Mae foundations. However, they are adherent to the needs of low-income buyers, allowing a 3% down payment. Homeowner’s insurance is required but can eventually be canceled. A down payment of 20% will bypass the insurance requirement altogether.

VA Loans
Va Loans are extended to active and veteran military, along with surviving spouses. They are known for aggressive home loan rates, no down payments nor insurance requirements. There is no official minimum credit score, but reportedly, 640 is typical for most VA Loans.

FHA Loan
The FHA Loan is typically a first pick for first-time buyers with a challenging credit score. The down payment starts around 3.5%, but with a credit score hovering around the 500 credit mark, it can boost the down payment requirement up to about 10%. This loan requires insurance for the life of the loan.

USDA Loan
Created by The US Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program, it is a zero down payment loan for eligible rural and suburban homebuyers. The income requirements, credit score, and location can cause variations in the process.

Looking for a place in Los Angeles to call home and wondering if you prequalify for a home loan? Contact The Suarez Team today to answer all of your first-time home buying questions and to determine which home buying program is ideal for you.