It’s no secret that first-time home buyers are facing a limited number of homes to choose from and higher home prices. There are a few glimmers of hope for those who are trying to find and qualify for a mortgage.
Eliminate PMI with NHHFA
The New Hampshire Housing Finance Authority (NHHFA) has come up with a finance program that can eliminate the monthly cost of Private Mortgage Insurance (PMI) which might save you over $300 per month. The $300 in monthly savings can make any home more affordable or help you to qualify for a higher-priced home – as much as $50,000 higher.
How do they eliminate PMI costs with only 3% down? They give the home buyer a 0% interest, 0 payment cash-assist second mortgage to cover the cost of a onetime PMI payment. This cash-assist second mortgage is forgivable after 4 years. This program feature is eligible on the “Home Preferred” programs where the average monthly income of the household is below 80% of the average median income.
Source: NHHFA 3/3/22
4.25% (4.825% APR) based on 0 point, 30-yr term, 97% LTV, with PMI, $300,000 Loan, 700 fico
Get Cash Assistance
First-time homebuyers need better mortgage programs to help make a home purchase affordable. Here is a great mortgage program from NHHFA: Flex Plus (Cash Assistance). It’s a 3.5% down program that includes 2%, 3%, or 4% of the loan amount as cash assistance. On a $300,000 loan amount, that’s as much as $12,000 of cash assistance.
How does this work? Here’s how: The homebuyer is given a 0% interest, 0 payment cash-assist second mortgage for the amount of the assistance. This cash-assist second mortgage is forgivable after 4 years. There are no income limits and to sweeten the pie even more, the less cash assistance you need, the lower the interest rate.
Source: NHHFA 3/3/22. $300,000 loan amount; 700 FICO
4.25% (4.825% APR) based on 0 points, 30-year term, 96.5% LTV, including Mortgage Ins. 2% cash assist .
4.875% (5.947% APR) based on 0-point, 30-year term, 96.5% LTV, including Mortgage Ins. 4% cash assist
Community Heroes Program
Here is a great benefit for some of our hardest working front-line heroes: a $3,000 closing cost credit for eligible essential workers including:
- Healthcare, Daycare & Eldercare Workers
- First Responders & Firefighters
- Law Enforcement Officers
- Active members of the Armed Services
This initiative is available for first-time buyers when purchasing a single-family primary residence through one of New Hampshire Housing Plus Mortgage Programs. There are program requirements including an annual income limit of $137,400, but this credit can be combined with other closing cost credits.
Source: NHHFA 3/3/22
A lower interest rate and a lower monthly payment with a higher credit scores and more
So much of getting the lowest rate and payment for your situation has to do with positioning yourself for the best possible program. There are several criteria that determine your lowest cost mortgage program, interest rate, and payment.
- How much cash you have to put into the transaction
- The type of property; single family, multi-family, condo
- The term or how long of a mortgage you choose
- Your income-to-debt ratio
- Your credit score
Most people get a 30-year fixed rate mortgage. Generally, you’re going to choose a property and price range based upon your income and savings. That leaves us with your credit score. If your credit score is in the 600s, you can still get a good mortgage program with a government backed or guaranteed program like FHA or VA. If you have a higher credit score, you will have more options for lower rates and discounted mortgage insurance. Here’s an example based upon a $350,000 purchase price with 5% down; a 44% DTI; in NH. Borrower A) has a 635 FICO while Borrower B) has a 760 score.
|Borrower A – Conv.||Borrower A – FHA||Borrower B – Conv|
|Tax & Ins||$600||$600||$600|
There is more than a $400 difference in the monthly payment for the same home with a conventional mortgage between Borrower A and B because Borrower B has higher credit score and qualifies for a lower interest rate and less expensive PMI. Borrower B with the higher credit score could purchase a $400,000 home for the same monthly payment Borrower A is paying for a $350,000 home.
Bottom Line: Because interest rates and mortgage insurance costs are tiered based upon credit risk, anything you or we can do to improve your credit score is going to make you new home cost that much less.
If you’d like details on any of these programs or strategies for securing an affordable mortgage, ask here or call us at 603-471-9300.