Low-Interest Financing By Lynda Jensen Affordable housing is the name of the game for some government and non-profit agencies. First-time home buyers, those with low or moderate incomes, and others may find a bonanza of opportunities for low-interest financing, depending on individual scenarios. Traditionally, lenders require buyers to put a payment of at least 20 percent of a home's purchase price down to get a home loan or mortgage. However, mortgage lenders will grant home loans to qualifying home buyers with a down payment of as little as three to five percent of the purchase price, if the mortgage is insured. These home loans are called low down payment mortgages. This is great news for those families who are unable to save for a large down payment. Mortgage insurance is necessary for a low down payment. The insurance protects the mortgage lender against financial loss if a homeowner stops making the payments. There are two forms of mortgage insurance, government and private. Mortgages backed by the government are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Farmers Home Administration (FmHA). The minimum down payment required by FHA is less than three percent. For single-family homes, the standard limit for a FHA insured mortgage ranges from $144,336 base mortgage to $199,405, in certain high-cost areas (metro area). Anyone can apply for the FHA insurance, but the other two are targeted to specific groups. The VA is limited to qualified, eligible veterans and reservists. The FmHA insures loans for the construction and purchase of homes in rural communities. To qualify for private mortgage insurance (conventional), buyers must make a down payment of at least five percent of a home's value. The down payment requirement drops to three percent for special affordable housing programs geared toward first-time, lower-income buyers. Private mortgage insurance is available on a wide variety of home loans and there is no pre-set limit on the loan amount. Other avenues Low interest financing may also come in the form of local initiatives from the Community Activity Set Aside, such as that offered in Winsted. Employees who work in Winsted and the surrounding communities may take advantage of money that is earmarked for new construction in the City of Winsted. In addition, this project includes a $10,000 interest-free deferred loan, based on income eligibility, said Don Welker of Community Lenders. Check with the Community Bank of Winsted for restrictions, he added. There is a deadline of July 1, 2002 for application of the funds, Welker said. For those interested in applying, contact Roger Boyce at Community Bank Winsted at (320) 485-3831. First-time home buyers Buyers who meet the requirements as first-time buyers may qualify for low-interest financing through the Minnesota Housing Finance Association. The state underwrites the loan, which keeps it affordable, said Jim Vrchota of the Citizens State Bank of Waverly. The loan typically pertains to those who have not owned a home in less than two years, with exceptions made to mobile home owners when property is not owned beneath the units, he said. Homes to be financed are generally no more than about $140,000, he said. First-time home buyers are usually required to attend a home buyers' course. Called "Home Stretch," the program if offered through the Central Minnesota Housing Partnership in collaboration with the Minnesota Housing Finance Agency. The program is jam-packed full of necessary information that even the experienced buyer would benefit from, said Don Welker of Community Lenders, based out of Monticello. Welker also serves the Community Bank in Winsted, among others. The program enlists professional community volunteers to share their knowledge.  The program objective is to identify new and existing community resources bringing them together into one program, which will provide training for first-time buyers. Instructors of the course are volunteer professionals who can explain topics in their field.  For example, when selecting a home, a real estate professional may assist.  The budgeting and credit section may be taught by a financial planner or an extension officer. A lender or title company may assist with the loan and mortgage application process and how to calculate closing costs. A builder or housing inspector may explain home maintenance. All instructors have the most up-to-date information available. Topics of the course include: · Mortgage approval process · Budget and credit issues · Real estate · Closing · Basic home maintenance Home Stretch will be offered in Hutchinson Fridays during the following dates, from 9 a.m. to 5 p.m.: April 5, May 3, June 7, July 12, August 2, and Sept. 6. Spanish workshops are available as well. More good deals Residents in McLeod, Carver, and Wright counties may also take advantage of low interest financing available through the US Department of Agriculture. Normally at this time of year, the funds have been tapped by now, but for whatever reason, there is leftover sums, said Gladys Swick of the US Department of Agriculture. There is no time limit or cycle to the distribution of funds, although it is given out until it's gone, Swick said. Several guidelines apply to all of the loans and grants. A partial summary follows. For additional information, including additional requirements, or an application, contact the Buffalo USDA office at (763) 682-1151. The loans and grants include the following: Home improvement loans for families, and grants for seniors (called the 504 program). This program offers two different components for home improvements, a loan for very low income families, and grants for senior citizens 62 and older. Very low income is defined as making less than $37,350 for a family of four (other guidelines are available through the USDA office). This program encompasses low-interest loans for home improvements, as well as grants for essential repairs needed by seniors. Other stipulations include: · loans bear a one percent interest rate, for up to 20 years. · the maximum loan per family is $20,000, and grant per family is $7,500. · a mortgage is required for loans in excess of $2,500. · the funds may be used along with funds from other private or public sources. · other requirements apply. For an application, contact the USDA office at the Buffalo office. Affordable home loans for low-income families (called the 502 loan). This program is designed to help low-income families obtain a home. Income guidelines apply, since the loan is designed for those with less than $52,500 income per year for a family of four (other guidelines are available through the USDA office). Preference is given to those applicants who attended a home buyer education program, which is offered monthly through a program called Home Stretch. For information about Wright County, contact Shirley Legatt at Wright County Community Action out of Maple Lake, (320) 963-6500. McLeod residents may contact Lisa Hill or Janet Vacek at the Heartland Community Action Agency at (320) 235-0850. Carver residents may call the Carver County HRA at (952) 448-7715 Preference is also given to applicants who obtain their credit needs from another lender. The loan program applies to first time buyers in addition to people who already own a home, although this home must be in need of repair or not be adequate. · the interest rate is fixed for the life of the loan. · mortgages are for 30 to 38 years. · loans may be used as a down payment to obtain financing through another lender. · monthly payments may be reduced by payment assistance. · other requirements apply. For an application, contact the USDA office at the number above. Guaranteed housing loans for moderate income families. This program is different than the other loan programs, since the loan originates from a bank, and USDA simply guarantees, or underwrites, the loan, Swick said. Income guidelines requires families with income of less than $58,000 for a family of four. · the loans bear a fixed rate agreed upon by the lender and borrower. · mortgages are for 30 years. · the borrower is responsible for paying origination fees and closing costs. · a one-time guarantee fee equal to two percent of the loan amount is charged to the lender, but may be passed on to the loan applicant. · other requirements apply. For an application, contact the USDA office at the number above.	Back to: >Guides Menu >herald-journal.com Herald Journal Publishing PO Box 129 Winsted, MN 55395 Local/Metro (320) 485-2535 hj@hjpub.com www.herald-journal.com
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