Mortgage Programs Get Creative to Promote American Dream

Mortgage Programs Get Creative to Promote American Dream
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While today’s real estate market continues to be driven by historically low interest rates, some consumers can take advantage of programs that make buying a new home an even more realizable dream.

Rural Development and Section 184 Indian Home Loans, as well as the HomeReady® program, are a few examples of vehicles for acquiring a mortgage that have more relaxed requirements than conventional loans. In some cases, this means consumers can benefit from less strict guidelines in terms of income, down payment, and other upfront costs.

A Rural Development Loan, for example, offers benefits like no down payment and reduced mortgage insurance for residents in states like Missouri, Oklahoma and Kansas. The loans, backed by the U.S. Department of Agriculture, are designed to promote expansion into rural communities. Many of these rural communities, however, are located just beyond city limits and surprisingly close to suburban areas.

“Many homebuyers are unaware of programs like the Rural Development Loans and are very surprised when they see some of the geographic areas where these loans are available,” Arvest Mortgage Division marketing manager Carter Maxey said. “We encourage borrowers to explore all of their loan options before they start house-hunting. If they realize they can potentially save money by getting a zero down payment loan with reduced mortgage insurance rates in an attractive area, it can expand their options.”

Fannie Mae’s new HomeReady program, meanwhile, boasts a unique structure for consumers. In addition to down payments as low as three percent and reduced mortgage insurance, HomeReady also offers a new feature that allows income to be considered from non-borrower household members, as well as non-occupant borrowers who are extended family members.

“HomeReady provides a lower-cost option for low-to-moderate income families, including those that may have multiple earners in one household,” Maxey said. “It offers an opportunity for these families to get more for their money.”

The Section 184 Indian Home Loan Guarantee Program is backed by the U.S. Department of Housing and Urban Development, and is another alternative for those who can prove Native American heritage. The program is designed specifically for Native Americans, Alaskan Villages, Tribes or Tribal entities who live on or off native lands. It offers up to 97.75 percent financing and is applicable to home purchases, new construction and refinancing.

All of these programs are lesser-known options than VA and FHA loans, which also provide more lenient standards than conventional mortgages. VA loans, backed by the U.S. Department of Veterans Affairs, provide 100 percent financing for veterans, require no down payment, and offer a fixed interest rate and no monthly mortgage insurance, which is a significant savings for consumers.

FHA loans, backed by the U.S. Federal Housing Administration, benefit lower-income families because they require a lower down payment, offer lower interest rates and accept lower credit scores than traditional programs.

All of these programs can help some consumers realize homeownership easier than via the conventional process.

“Generally speaking, with any type of loan product, the home affordability index, which is based on interest rates, pricing and associated factors in home buying,” Maxey said, “is the best it has been in probably 30 years.”