Find a home loan program that’s right for you

In the past few weeks, we’ve discussed what you can do to prepare your finances for a home purchase. One topic we explored was the down payment, which can be a financial obstacle for home buyers  Today, we’re going to look some of the programs you may qualify for, which can provide you with 100 percent financing or assist you with the down payment.

A conventional home loan from a financial institution will typically require that you purchase private mortgage insurance if you don’t have a 20 percent down payment. But there are federal programs that may be available through your lender, which do not require private mortgage insurance and come with other features.

USDA Rural Development Guaranteed Loan Program

This U.S. Department of Agriculture program can make guaranteed loans available to qualifying low-income and moderate-income families living in rural areas. Under USDA guidelines, much of Guam (except for parts of the northern and central areas) fulfills the “rural” requirement in terms of property eligibility for single-family houses. In general, families in Guam of 1-4 people with an income of up to $74,750 are eligible under 2012 income guidelines, as are Guam families with 5-8 people and a total income of up to $98,650.

This program can provide 100% financing to qualifying homeowners, including eligible closing costs and lender fees, at a fixed interest rate for a 30-year term. The program can also be more accommodating than conventional loans when it comes to credit history and current debt. To learn more, visit the USDA website and talk to a lender who participates in the program. The USDA offers several loan assistance programs, and another program may fit your needs.

U.S. Department of Veterans Affairs Home Loans

If you have served or are serving in the armed forces, you should find out if you qualify for a VA Home Loan. Like the Rural Development Guaranteed Loan Program, these loans can provide 100% financing and don’t require private mortgage insurance. The federal government will guarantee a portion of your loan, and that can give you some room to negotiate with your lender on interest rates. There are also more options for repayment plans that you can discuss with your lender.

The 2012 VA Loan limit guaranty for Guam is $625,500. But just keep in mind, your own affordability will be determined by your VA entitlement and income.

In addition to these federal programs, there are also local government programs that offer loans and down payment assistance. We’ll discuss one of these programs from the Guam Housing Corporation.

Community Affordable Housing Action Trust (CAHAT) Loan

This loan from the Guam Housing Corporation assists future homeowners with down payment costs. This is a zero percent interest loan with a 30-year term, and acts as a second mortgage in addition to the first mortgage for the home. The maximum amount a homebuyer can borrow interest-free for this loan is $40,000.

The Guam Housing Corporation also acts as a lender for the VA loan and other loan programs, so it’s another good resource to explore as you look at housing programs.

The programs above are a starting point. You can talk to lenders, ask friends and family about housing programs, and learn about other government and nonprofit resources for housing assistance. Cast your net wide, and you’ll be able to find the best financing option that meets your needs.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com

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