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2011-10-26 13:30:11
Two $0 down mortgage options

I wanted to compose this blogl to inform home buyers about two current mortgage programs that allow buyers to purchase a home for $0 down. These are great programs that I have had several clients use over the past two years and are amazing options for those who qualify:

1) USDA Rural Development - Only homes in rural areas qualify. In Utah County, Rural areas include Saratoga Springs/Eagle Mountain and anything south of the Spanish Fork river (Salem, Payson, Santaquin, etc). The purpose of this loan, created and backed by the federal government, is to encourage development of rural areas. This is a zero ($0) down loan with amazing interest rates (currently 3.875%) and very little mortgage insurance (well below FHA or 5% Conventional). There are some requirements about not owning other homes, minimum credit scores and income restrictions. But this is a great loan and many buyers do qualify. I have closed several of these and all of these buyers have greatly benefited from this loan.  

For more information on this Rural Development loan, call Mike Christensen with Lexington Mortgage at (801) 362-4394, and/or visit: http://www.rurdev.usda.gov/HSF_SFH.html
2) Utah Housing - This is a program funded by the state of Utah but is not limited to any particular area. So for those who need a $0 down loan option but would like to purchase in a non-urban area, this is probably your best option. This is an FHA loan. An FHA loan requires at least 3.5% down. In a Utah Housing loan, the state of Utah loans the borrower the 3.5% down for the FHA down payment, but at a higher interest rate of 2% more than the rest of the loan. But due to the amount being so relatively small, the higher interest rate on the '2nd mortgage' doesn't make a huge difference. Currently the rate on the 96.5% of the loan (the first mortgage) is 4.25%. The rate on the remaining 3.5% would therefore be 6.25%.

There is still mortgage insurance and other requirements about not owning other homes, minimum credit scores and income restrictions, and obviously payments are lower if a buyer is able to put the 3.5% down, but it is a great option for those with good credit, looking to buy a first home, but don't have enough funds for a traditional down payment. Several of my past clients have used this program and have been very grateful for it.

For more information on this Utah Housing loan, call Mike Christensen with Lexington Mortgage at (801) 362-4394, and/or visit: http://www.utahhousingcorp.org/

Current Interest Rates:

FHA - 3.75%
Conventional - 3.75%
Rural Development - 3.875%
Utah Housing - 4.25% (First)
VA - 4%

This is an amazing time to purchase a home. Rates have fallen over 2% from 3 years ago when rates were considered to be amazing. A 2% difference in rate is a savings of $333/month and $4,000/year on a loan of $200,000, or is the same payment as a $250,000 home loan today compared to a $200,000 home loan three years ago. In addition, home prices have dropped 15%-45% depending on the area and the market. 

So not only can a buyer purchase a much more expensive home loan for the same price, but that amount will purchase a much bigger/nicer/newer home too! It is the perfect storm for home buyers. My advice is to not delay. We do not know how long this combination will last. Home prices will likely remain relatively low and stable for the next year or two (or three), but interest rates can start creeping up any day. 

I just had an investor close on an investment property with a 30 year mortgage with 20-25% down at only 4.25% interest. His cash flow on this property is amazing and he will do extremely well on this property. I will repeat it again, this is an amazing market for investors, first-time home buyers, and upgrading home buyers, and home buyers in general. It is also a great time to build a new home. 

If there is anything else that I can do for you, don't hesitate to contact me. We are entering the slower time of year for real estate transaction which not only means that demand is lower, but it means that you will get more of my undivided and focused attention at fulfilling your real estate needs. 
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