Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Owning your own home is the American dream and being in a lower income bracket doesn’t automatically disqualify you from buying a home. Fortunately, there are a number of low-income home loans available to help you reach your goal of homeownership.

Depending on other important factors such as your credit score, debt, location, and profession, you may be able to qualify for a home loan through one of the following programs: FHA loans, USDA loans, Fannie Mae HomeReady loans, Freddie Mac Home Possible® loans, Good Neighbor Next Door program, and VA loans. 

Before we take a closer look at the eligibility requirements of these different loan programs, here are a few tips for buying a home with low income:

The first thing you’ll want to do is review your credit reports from all three major credit reporting agencies (Equifax, Experian, and Transunion)  and dispute any errors you may find. Make a concerted effort to pay all of your accounts on time and lower your credit usage to below 30% of your available limit. This can help improve your credit score before applying for a mortgage.

You should also try to pay down your outstanding debt (especially credit card balances) which will help lower your debt-to-income (DTI) ratio. Next, you’ll want to get a mortgage pre-approval. When house hunting, sellers are likely to take you seriously if you’ve already been pre-approved when you put in a purchase offer. A pre-approval tells you how much a lender might be willing to lend you, based on a review of your overall financial picture.

After you get a mortgage pre-approval, the next step is to enlist the services of a qualified Oakland County MI real estate agent. Find an agent who is knowledgeable about the local housing market as well as the different home buying programs that are available for low-income borrowers.

Once you’ve found an agent you can work with, start looking at home buying assistance programs. Check with the Michigan State Housing Development Authority (MSHDA) for available homebuying assistance programs, including grants or loans to help cover your down payment or closing costs.

Low-income home loan programs

FHA loans

FHA home loans are loans backed by the Federal Housing Administration (FHA).  An FHA loan can be a good option for first-time homebuyers who may not qualify for a conventional loan or for those who may be struggling to save a 20% down payment. With an FHA loan, a borrower can have a credit rating as low as 500 and a fairly high debt-to-income ratio.

These loans require only a 3.5% down payment, which can come from gifts, and have less stringent requirements for credit rating or income. FHA loans require all borrowers to pay upfront and annual mortgage insurance premiums, no matter their credit score or down payment amount. Borrowers putting the minimum 3.5% down will pay FHA mortgage insurance for the life of the loan.

Eligibility requirements for FHA loans:

  • A 500 to 579 credit score and a minimum 10% down payment
  • A 580 credit score and a minimum 3.5% down payment
  • Meet local county FHA loan limits. Oakland County, MI FHA loan limits range from $331,760 for 1 living-unit home to $638,100 for 4 living-units.  

USDA loans

The U.S. Department of Agriculture also ensures low-income home loans provided by approved lenders up to 90% of the loan amount. USDA loans cater to homebuyers with a modest income. With a USDA loan, no down payment is required, no assets needed to qualify, and no maximum loan amount. 

Eligibility requirements for USDA loans:

  • Preferred 640 credit score
  • Meet local income eligibility requirements. For a family of 1-4 in Michigan, the average household income limit for a USDA loan is around $86,850, and for a family of 5 or more, it can be as high as $143,300.
  • Purchase a home in a designated rural area

Fannie Mae HomeReady® loans

The HomeReady mortgage program from Fannie Mae offers low-income home loans to homebuyers with limited cash for a down payment. Underwriting guidelines are more flexible to make it easier to qualify and both first-time homebuyers and repeat buyers are eligible. If all borrowers on the loan are first-time buyers, at least one borrower must meet the homeownership education requirement, by completing an online course on the Framework website.

Eligibility requirements for Fannie Mae HomeReady® loans:

  • Minimum 620 credit score
  • Minimum 3% down payment
  • Earn a maximum of 80% of the area median income (AMI)

Freddie Mac Home Possible® loans

The Freddie Mac Home Possible® mortgage program also caters to very low-to low-income borrowers with limited down payment funds. Both first-time and repeat homebuyers may qualify. Co-borrowers who do not live in the home can be included for a borrower’s one-unit residence, and borrowers are permitted to have another financed property –  all with competitive pricing and the ease of a conventional mortgage. 1-4 units, condos and planned-unit developments, and manufactured homes are eligible with certain restrictions.  

Eligibility requirements for Freddie Mac Home Possible® loans:

  • Minimum 660 credit score
  • Minimum 3% down payment
  • An income less than or equal to 80% of the Area Median Income (AMI)

HUD’s Good Neighbor Next Door program

With the Good Neighbor Next Door program from the U.S. Department of Housing and Urban Development (HUD), law enforcement officers, teachers (pre-Kindergarten through 12th grade) firefighters, and emergency medical technicians can contribute to community revitalization while becoming homeowners. HUD offers a discount of 50% from the list price of the home.

In return, an eligible buyer must commit to live in the property for 36 months as his/her principal residence. If an FHA loan is used to buy the home under this program, the minimum required down payment is $100. You can also use a conventional or VA loan.

Eligibility requirements for HUD’s Good Neighbor Next Door program: 

  • Work full-time as a pre-K through 12th-grade educator, emergency medical technician, firefighter, or law enforcement officer
  • Buy a home in a HUD-designated revitalization area
  • Must live in the home for at least 36 months (3 years)

VA loans

The U.S. Department of Veterans Affairs (VA) offers a mortgage program to help veterans, service members, and surviving spouses purchase homes. The VA is not a direct mortgage lender, but it does guarantee a portion of the loan so borrowers can receive more favorable loan terms like a lower interest rate. 

If your VA-backed home loan goes into foreclosure, the guaranty allows the lender to recover some or all of their losses. Since there’s less risk for the lender, they’re more likely to give you the loan under better terms.  90% of all VA-backed home loans are made without a down payment. 

There is no minimum required down payment or mortgage insurance requirement. These loans also limit the amount you can be charged for closing costs. There are no VA loan limits  

Eligibility requirements for VA loans:

  • Valid Certificate of Eligibility
  • Preferred minimum 620 credit score
  • Required VA funding fee to offset program costs to taxpayers

Partner with highly-rated Oakland County MI REALTOR® – Tom Gilliam   

Award-winning Oakland County MI REALTOR® – Tom Gilliam provides the kind of knowledge, skills, dedication, and professionalism you need when buying or selling a home. 

With over 20 years of real estate experience, Tom will protect your interests, advocate for you, negotiate on your behalf, and be your trusted guide and advisor every step of the way. Tom works very hard for his clients and will always go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling real estate in Oakland County MI, please give Tom Gilliam a call today at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

A Successful First-Home Purchase in Oakland County MI

A Successful First-Home Purchase in Oakland County MI

Think You’re Ready To Make A Successful First-Home Purchase in Oakland County MI? 

It’s very exciting — and perhaps a bit overwhelming — given the expense, time and the number of steps it takes to make a successful first-home purchase in Oakland County MI today. You’ll certainly face many decisions along the way, and there’s plenty to doA Successful First-Home Purchase in Oakland County MI before you achieve your goal of your beautiful first home in Oakland County MI. Relax! It may take a few weeks to get it all together, but buying your first home in Oakland County doesn’t have to be a difficult process if you take it step by step — and have me along as your guide.

Here’s an easy-to-follow summary of the process you’ll go through in buying your first home in Oakland County Mi. Keep it handy as you proceed, and be sure to ask me any questions you have along the way.

  1. Select An Experienced Oakland County Mi Real Estate Professional As Your Buyer’s Agent
    A buyer’s agent is a real estate professional that is contracted to look out for the interests of the buyer rather than the seller. Signing me as your buyer’s representative means I can not only help you find your first home, but I can help negotiate price and contract terms on your behalf and provide information about a home, the sellers, and even previous offers and counteroffers, among other services. In most situations, buyer’s agents are paid from the sales commissions offered by sellers.
  2. Check Your Credit 
    Be sure to check your credit before applying for a mortgage. You’ll want to ensure all the information in your report is accurate — and correct any information that isn’t — to get the credit score you’ll need to qualify for a mortgage at the best interest rates available today. -By law, credit reporting agencies must provide you with a free copy of your report once every year — if you ask for it. To request reports from the three major credit reporting agencies — Equifax, Experian and TransUnion:

    • By phone, call toll free (877) 322-8228.
    • Online, visit www.AnnualCreditReport.com.
    • By mail, write to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

    TIP: Credit reports do not include your credit score. Although you can obtain a free copy of each credit report annually, finding out about your credit score will cost you a few dollars.

  3. Investigate Mortgage Programs
    There are lots of mortgage options available, all with different down-payment requirements, interest rates, terms and conditions. I will be happy to help you sort through your choices to find the best fit based on your financial situation and goals.
  4. Interview Reputable Lenders
    Once you’ve decided on the loan options you’re considering, contact several lenders in Oakland County Mi to find out what they can do for you. You’ll want to know about their interest rates, loan costs, terms, etc. I will be happy to provide you with a list of lenders who have helped our clients in the past.
  5. Get Pre-Approved For A Loan, Not Just A Pre-Approval Letter
    Pre-approval means the lender has reviewed your income/debt ratio, assets and credit profile and determined the amount of money they would be willing to lend you providing various conditions are satisfied by the particular home you decide to purchase — such as a supporting appraisal, clear title, etc.Here’s how loan pre-approval can help you:

    • Knowing exactly how much money you can qualify to borrow will ensure you don’t waste your time looking at homes you can’t afford.
    • Based on your loan pre-approval, you’ll know in advance what contract terms you’ll want to negotiate with sellers — for example, seller-paid points, closing costs, inspections, etc.
    • If you find a particularly good deal on a home, you’ll be able to jump on it, without worrying about whether you’ll get the financing you need.
    • Your pre-approved loan gives sellers confidence that their contract with you is more likely to go to settlement/closing –and get there more quickly — than would contracts from competing buyers who have yet to secure financing approval.
  6. Develop A “Needs And Wants” List
    Include the type of home — single-family, townhome, condo, etc. — number of rooms, size, location in Oakland County Mi and any other amenities that are important to you in your first home. Be sure to distinguish between minimum requirements (“needs”) and items you could do without (“wants”), if need be. Remember, you may not be able to afford your dream home as your first home, but making a smart choice will allow you to live in it comfortably and sell it when you’re ready.
  7. Search Available Properties
    I can pull all the homes on the multiple listing service (MLS) in Oakland County MI that match your needs and budget. Of course, you can view many properties online to sort out those that look like what you hope to find.
  8. Tour Homes
    This is where the real home shopping takes place — in person with your agent. Your personal visits to homes in Oakland County MI gives you a clear sense of their location, condition, amenities and overall “feeling,” none of which comes across accurately online. Be sure to drive and walk the neighborhood surrounding your top choices.
  9. Pare Down Your Choices Using Your “Needs And Wants” List
    It’s useful to go back to your original wish list to help you focus on selecting that one property in Oakland County MI that’s just the right combination of amenities to be your first home.
  10. Write A Purchase Offer For The Home Of Your Choice
    I will help you design a purchase offer to get you the best deal on the home you want in Oakland County Mi- and consider contingencies to protect your interests. I will submit your offer with your deposit (earnest money) to the seller or seller’s agent.-An earnest money deposit shows the seller that a buyer is serious about purchasing a property. When the transaction is finalized, the funds are put toward the buyer’s down payment. If the deal falls through, the buyer may not be able to reclaim the deposit.
  11. Negotiate The Contract
    Faced with an offer, sellers have several options — rejecting it or letting it lapse, accepting it as is, or making a counteroffer. Most contracts go through several rounds of back-and-forth negotiations (counteroffers) before both parties agree to the sales contract. I will put my many years of proven negotiating experience to work for you, so you’ll feel like a winner when you sign the bottom line of the contract to buy your first home in Oakland County MI.
  12. Submit Your Contract To Your Lender
    Your lender will need some more information and documents than were required for loan pre-approval. Staying in touch with your loan officer and responding to requests quickly will help keep your financing on track and on time.
  13.  Purchase A Homeowner’s Insurance Policy
    Your lender will require proof that you’ve purchased homeowners insurance (also “hazard insurance”) — shop various insurers to find the best deal.
  14. Schedule And Attend Home Inspections
    Hiring a professional home inspector is a smart move in Oakland County MI, especially when buying your first home. The inspector will provide you with a full report on the condition of the home’s systems, appliances and structure — and even more information if you’re available when the inspection is conducted (old clothes are recommended). You may also want to order specialty inspections to check for problems such as pests, radon gas, mold, etc.
  15. Negotiate Defects Found During The Home Inspection
    With a home-inspection contingency in your contract, you’ll be able to back away from the deal if the inspector finds problems the seller is unwilling to fix and you’re unwilling to buy. Ideally, though, you’ll negotiate with the seller to resolve problems so your home purchase can go forward.
  16. Prepare For The Move To Oakland County MI
    At this stage, you’ll be wrapping up things at your old home and getting ready to move into your new one — disconnecting utilities and services, setting up accounts for your new home, getting rid of items you’d rather not move, hiring movers or lining up boxes and friends, etc.
  17. Conduct A Final Walk-Through Of The Home
    Shortly before closing/settlement, you’ll conduct a walk-through inspection of the home to ensure that the property’s condition hasn’t changed and meets your contract’s requirements.
  18. Attend Closing/Settlement
    With your agent’s help, you’ll check all final documents for accuracy, sign the necessary documents, pay the buyer-assigned closing costs and pick up the keys to your first home. Just one step left — move in and celebrate!

 

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