Home Advantage Loans
No Money Down Mortgage in Washington
Advantages of the Home Advantage Program
The Home Advantage Down Payment Assistance program is a second mortgage on top of an FHA loan to cover the down payment, essentially turning the FHA loan into a zero down loan. This loan is sponsored by the Washington State Housing Finance Commission and funded through state bonds. Because the FHA loan allows the seller to contribute to buyers closing costs, this could be potentially a no money out pocket home mortgage.
There is also no interest charged on the Home Advantage loan and there are no payments due until the FHA loan is paid in full, whether that is at the end of the 30 years, of upon sale of the house. At that time the Home Advantage loan is payable in full.
Maximum Loan Amount
The maximum loan amount of an FHA loan in Spokane County for a single family home is $271,050. The Home Advantage second mortgage can be for up to 4% of the primary mortgage amount. This 4% is designed to cover the 3.5% down payment required in an FHA home mortgage.
Debt to Income Ratio
The debt to income ratio is going to be the same as that of any other FHA loan. In an FHA loan there are 2 aspects of debt that are considered.
The first consideration is your total monthly housing expenses. This includes principal, interest, taxes, insurance and any association dues. This cannot exceed 29% of your gross monthly income.
The next consideration is total payments of recurring credit debt. This includes the housing expenses mentioned before in additional to all other monthly recurring credit debt. Car payments, student loans, health club memberships and minimum credit card payments would be some of the things to consider. The total of these expenses is not to exceed 41% of your gross monthly income.
The Home Advantage loan does not count against your monthly debt payment because there are no payments due until the primary FHA loan is paid off.
The minimum credit requirements are the same as any other FHA loan. The minimum FICO credit score for an FHA loan is currently 580. Often times the lender will have a credit overlay with tighter credit requirements. It would not be uncommon to see credit requirements as high as 620 or 640.
Down Payment Requirements
An FHA loan requires a minimum of 3.5% down. The Home Advantage can be for up to 4% of the loan amount of the FHA loan, therefor the net down required should be nothing.
The closing costs are the same as with any other FHA mortgage, and because FHA mortgages allow for the seller to contribute to the buyer's closing costs, it is possible to have no closing costs to the buyer. In this case, you could have a zero out of pocket home loan.
There is mortgage insurance on the FHA but not on the Home Advantage Loan. Recently the rules have changed for the FHA home loan mortgage insurance. Mortgage insurance is required for the life of the loan regardless of the current loan to value ratio.
The Home Advantage Program sponsored by the Washington State Housing Finance Commission has a maximum borrower income limit of $97,000 gross annual income. If there is more than one person on the loan, than it is the sum of their incomes. Other household income of non-borrowers does not count towards this limit. These income limits are not part of the regular FHA loan.
To be eligible for the Home Advantage Program the borrower is required to take a 5 hour Homebuyer Education Class. At the end of the class, all students will receive a certification of completion. If there is more than one borrower on the loan, at least one of them is required to take this class.
The 5 hour class is sponsored by the Washington State Housing Finance Commission and taught by a real estate professional and a lending professional. Both instructors are required to go through special training and certification and the class is filled with valuable information for the home buyer.
The class is free and filled with a lot of valuable information. Regardless of whether or not someone is going to take advantage of the Home Advantage Down Payment Assistance Program, most any home buyer could benefit from this class.
written by:Todd Hays