Fannie Mae Foundation: How to Buy a Home

Explain to learners that special mortgages allow more flexibility for borrowers, especially first-time buyers. Through these programs, more people can qualify more easily for a loan.

Note: Background information. Traditional mortgages had strict underwriting ratios (e.g., 28 percent
of one’s monthly income could be used for mortgage payments), required a 10-percent down payment, and require two months of mortgage payments in reserves in the bank. Special mortgages have different
underwriting ratios, require less money down, and may waive the two months’ reserve requirement.

Unit 3 : Lesson 1: What you should know about mortgage loans

Special mortgage loans can help you
buy your dream home

Many lenders and some communities have programs to help first-time buyers. With some of these programs, you may be able to accept a gift from a relative. Or, you may be able to borrow part of the money you will need for a down payment or closing costs from a local nonprofit organization or government agency. With other special mortgage programs, you may be able to get money that you will not have to repay. You can use this money to cover some of the costs of buying a home.

Special loan programs

Special loan programs often exist to help first-time buyers. With some of these programs, you may be able to accept a gift from a relative or borrow a portion of the money you will need for the down payment and closing costs from a local nonprofit organization or government agency. With others, you may be able to get a grant or other funds that you will not have to repay and can use to cover some of these costs. If you don’t qualify for a mortgage based on some of the traditional underwriting factors described earlier, you may want to find lenders who offer special mortgage loans like these. These loans allow you to use a greater percentage of your income toward monthly housing expenses and will not require you to have two months of cash in reserve at closing. If you don’t have a traditional credit history, you can show you have a good credit history using your rent and utility receipts. Ask lenders in your area about these programs.

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