In recent years, millennials have started taking over as the dominant home buyers in the U.S. Fierce competition in the housing market was seen in 2021, particularly due to all-time low interest rates and limited inventory. Millennials are also starting to raise their own families, which is another reason why they’re scrambling to buy homes.
However, this phenomena has caused a spike in home prices. Adding to the problem is the Fed’s decision to increase interest rates in March 2022. In comparison to buyer competition, more millennials now consider the high interest rates as the main obstacle of homeownership.
Despite these unfavorable conditions, it doesn’t change the fact that millennials feel the need to own homes. This is why U Loans have introduced several low income home loans in their programs. Find out more below.
The Fundamentals of Home Loan
FHA Loans
Guaranteed by the United States Federal Housing Administration (FHA), these loans aim to assist home buyers earning low incomes. Good news, the rate of mortgage insurance premium has been cut down to 0.55%. This is equivalent to a monthly discount of $120 for a $500,000 home. FHA loans are also one of the preferred first time home loan programs due to its low down payment requirement.
Compared to other conventional financing, borrowers with lower credit scores have higher chances of securing this Fresno home loan. Plus, the home seller may be able to cover all or most of your closing costs. FHA loan interest rates likely depend on the borrower’s credit score. If a borrower has a high credit score, he’ll be subject to lower interest rates compared to someone with a lower score.
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No-Income Loans
As one of the low income home loans, no-income loans are provided on collateral basis. Liquid assets are the preferred collateral in this case, since they can be sold quickly to yield cash.
The term “no-income loan” doesn’t mean it’s tailored for people with zero income. Income is still an essential part of a loan application. But in the case of no-income loans, the borrowers usually earn incomes not from a full-time job. Lenders of no-income loans verify a borrower’s eligibility by checking whether he has adequate liquid assets or other sources of income.
No-income loans are similar to other first time home loan programs. Lenders will consider your finances, assets, credit score and income sources to predict whether you’ll be able to repay them. To give you a clear picture, here are the list of liquid assets you can use:
- A house
- Bonds issued by the government
- A vehicle.
As for the source of income, you may be considered for the Fresno home loan if you can present evidences of the following:
- Social Security benefits
- Investment-related income, for example dividends
- A job acceptance letter which shows your monthly wage
- A retirement account
- Veterans Administration (VA) benefits
- Partner income.
Note that no-income loans come with higher interest rates and fees in order to cover the risks taken up by the lender.
Fannie Mae and Freddie Mac
Low income home loans offered by U Loan Mortgage are Fannie Mae and Freddie Mac. Regular conventional loans require buyers to pay around 20% in down payment. In contrast, U Loan Mortgage are first time home loan programs that only need 3% down. In other words, these programs can cover up to 97% of the home purchase.
Which Fresno home loan should you opt for? Despite having several differences, these 2 programs have a few things in common. Borrowers are eligible for the loans if their income is below 80% of the average income for their area. They also have the obligation to complete a homeownership education course before they buy homes. Both also provide fixed-rate mortgage terms which can stretch up to 30 years, giving home buyers a sense of security.
Conclusion
Buying a home is no easy task. It’ll take good timing, lots of research, money and dedication to pay off loans. For millennials out there, consider using low income home loans to your advantage. What are you waiting for? Take that first step of your home-buying journey!
Brandy Mozzone
Phone Number: 408-613-0350
bmozzone@UMortgage.com
Realtor Linda Peltz
Phone Number: 559-353-4556
linda.peltz@exprealty.com