Benefits of Interest-Only Mortgage Loan

When you are looking to purchase a home, you may consider different loan types, one of which is an interest-only mortgage. What are the benefits of interest-only mortgage loans? What are the disadvantages? When should you consider an interest-only loan?

Here we take a closer look at this loan type and how it may work to your advantage when purchasing a home.

What is an interest-only mortgage loan?

In simple terms, an interest-only loan is a mortgage where you pay just the interest for the first several years of the loan. In most cases, these payments last between three and ten years. It typically lowers your monthly mortgage payment during that period. However, once the interest-only period closes, your payments increase to include both the interest and the principle.

Most interest-only loans are adjustable-rate mortgages (ARM), so your interest rate can increase or decrease throughout both the interest-only and the remaining period. When the interest-only period ends, your loan can either require a lump sum of payments or continue with regular monthly payments that include both the interest and principal balance.

To get a better understanding, let’s look at a basic example:

If your mortgage is on $100,000 with an interest-only ARM at 5% and an interest-only loan period of ten years, you will have a monthly interest-only payment of $417 for the first ten years. When the interest-only period ends, your payment will then include the principal and interest and raise substantially. Keep in mind that if you had a 30-year loan, the principal is now amortized over 20 years instead of 30.

Advantages of an interest-only mortgage loan

Interest-only loans can make good financial sense for buyers in a wide range of different situations. Benefits can include:

• Increasing income: If you are anticipating a substantial increase in income before the end of the interest-only period, this type of loan could allow you to purchase a larger home you know you can afford after the income increase.
• To qualify for a larger home: Because your first payments will be lower during the interest-only period, you may qualify for a larger, more expensive home than you would with a conventional loan.
• Rising home prices: Using this type of loan may allow you to purchase a home before prices rise while still allowing you the time to prepare for the increase in payments after the interest-only payment period ends. It also allows you to buy before the home prices increase, meaning you will gain equity in the home before you begin paying the principal and can refinance later.
• Investment strategy: During the interest-only period, the money that would go toward the principal can be invested elsewhere to get a higher return.
• Tax deductions: As the payments are all interest during the initial period, they are completely tax-deductible.
  Pay the equity on your schedule: You can pay the equity down on your schedule during the interest-only payment period, allowing you to decrease your payments when that period ends.

Disadvantages of an interest-only mortgage loan

While there are many times that this type of mortgage loan is beneficial, there are some disadvantages that can create problems when the interest-only period ends. These can include:

• Rising interest rates are possible with an ARM.
• If you plan to invest the principal payment amounts during the interest-only period, you risk losing or spending the money instead of investing.
• Changes in your situation may leave you unable to afford the larger payments when the interest-only period ends.
• The housing market may decline, and you may not experience the home appreciation you expected. In some cases, the loan balance may be higher than the home’s value, making it impossible to refinance the loan.

Types of interest-only home loans

Interest-only loans are also known as exotic loans, exotic mortgages, and are sometimes referred to as subprime loans. While they were never targeted to those with subprime credit, they did play a large role in the subprime mortgage crisis years ago. For this reason, many interest-only loans of the past are no longer used. There are, however, still interest-only mortgages available that can benefit some home buyers.

Jumbo mortgages

Jumbo mortgages are necessary for home loans that exceed the limits set by the Federal Housing Financing Agency (FHFA). While conforming loan limits can vary by state, as of 2022, the upper limit is currently $647,200. Adding the interest-only to these large loans can allow wealthy buyers to maintain larger returns in the financial markets instead of the mortgage principal. However, to qualify for these jumbo interest-only loans, high qualification standards must be met.

Interest-only home equity lines of credit (HELOC)

Interest-only home equity lines of credit, or HELOCs, are second mortgages that work like credit cards where you borrow against the equity in your home. For example, they are often set up where you can use the credit line as needed during the first ten years while only paying the interest. At the end of the 10-year period, the credit line is closed, and your remaining payments over the next 20 years cover the interest and principal.

30-year interest-only mortgages

These are similar to a conventional 30-year mortgage, with the main difference being you only pay interest payments for the initial period (between 3-10 years). However, because the principal is not paid down during the initial period, monthly principal payments are higher for the remaining 20 years than they would be in a conventional 30-year mortgage. To qualify for these loans, lenders typically require a higher down payment and charge higher interest rates due to the increased risk they are taking with the loan.

Can an interest-only loan benefit you?

While an interest-only mortgage loan can be beneficial for a lot of buyers, it is definitely not for everyone.

At Hero Home Programs, we can help you navigate the home buying and lending process and help you determine if this is a good option for you or if better programs exist to help you achieve your homeownership goal. To learn more about your home loan options, visit Hero Home Programs online today.

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Guide to Closing Costs and Taxes

When you buy, sell, or refinance a home, closing costs are a major part of every transaction. Unfortunately, this can also be costly as many different mortgage fees and closing costs are required to transfer the home into your name. But what do closing costs include? Are taxes included in closing costs? Are any of these costs tax-deductible?

This guide will take a closer look at what is included in your closing costs and what may be considered deductible when it comes to tax time.

What happens at closing?

The purpose of the closing is to transfer ownership of the home to you. During this transfer, it is common to include the seller, real estate agent, your title or escrow company, and a variety of supportive office staff. During closing, you will go through and sign all the forms necessary to transfer ownership of the home. The title or escrow firm collects cashier’s checks for the closing costs and distributes the new keys to you upon completion.

What are closing costs?

Closing costs are essentially how third parties and lenders involved with the processing of a mortgage loan receive payment for their processing. On average, a buyer can expect to pay 3%-6% of their loan amount in closing costs. A few days prior, every buyer should receive a closing disclosure that itemizes all the fees included in the total closing costs.

Third-party closing costs

Third-party closing costs are expenses paid to outside companies and providers that assisted in selling the home.

• Attorney fees: Not all states require the use of attorneys. However, if an attorney is needed, they typically charge a percentage of the selling price but can work for hourly or flat fees.
• Title search costs: Your title company will arrange for a title search before the loan is completed to ensure no liens or lawsuits are involved with the property. They also verify that the seller is the current owner.
• Homeowners insurance: In many cases, your loan may require the first year’s premium of homeowner’s insurance to be paid up-front as part of your closing costs.
• Real estate agent’s sales commission: Real estate agents work for a commission on every property sold. This payment goes directly to the real estate agent.

Finance and lender charges

Finance and lender charges are assessed by your mortgage lender and can cover a wide range of fees and payments. These can vary based on your lender’s requirements but can include:

• Origination or application fees: These fees are for processing your mortgage. They may be a flat fee or a percentage of the loan value.
• Inspections: Inspection fees cover the required inspections necessary to approve your loan. These can include termite inspections or water tests to ensure a well and water system can maintain sufficient water supply to the purchased property.
• Points: A point equals 1% of the loan value and paying points can help you reduce your mortgage rate.
  Document preparation fees: These fees cover the price of all the documents you will be signing during your closing.
• Land survey: Lenders often require a land survey to ensure that no one has encroached on the property. Land surveys are also done to verify buildings and determine improvements on the property.
• Appraisals: These costs cover the appraisal of your property that was used to establish value.
• Credit report: This is the cost of running the credit report required to approve you for your mortgage loan.
• Private Mortgage Insurance: Lenders often require PMI for buyers with a down payment less than 20%.
• Release fees: If the property has current liens against it and the seller has worked with the lien holder to acquire payment from the sale of the property, fees may be necessary to release the lien. In most cases, the seller pays this fee.
• Escrow account: Many lenders require that an escrow account is set up to cover taxes, homeowner’s insurance, and PMI if required. This money is collected monthly and used when these premiums are due.
• Prepaid interest: While your typical first mortgage payment is not due for six to eight weeks after closing, interest on your loan begins accruing immediately. Prepaid interest is the interest that will accrue between the closing date and your first mortgage payment.

Statutory costs and taxes

Statutory costs and tases are the fees collected by state and local agencies necessary for the sale of any property. These will vary by state and county and can include:

• Transfer taxes: This is a common fee required to transfer the title and deed from the seller to the buyer.
• Recording fees for deed: The county clerk typically collects this fee to record the deed transfer and adjust the property tax billing information to the new owner.
• Pro-rated taxes: Depending on when your sale takes place and when local taxes are collected, taxes such as school taxes and county taxes may need to be split between the buyer and seller depending on the occupancy percentage.
• Impound account: Similar to an escrow account, your lender may require an impound account to cover local taxes.
• State and local fees: Some state or local governments may require additional fees, such as a mortgage tax.

Are closing costs deductible?

Not all closing costs are deductible when filing your taxes for the year. However, those fees that are considered taxes or interest are.

Loan points

The IRS considers points as a form of prepaid interest. These are tax-deductible if you meet these conditions:

• The mortgage covers your primary residence
• The mortgage is being used to make upgrades to your primary home
• Paying points is a normal business practice in your area, and you did not pay more than is customary
• You use the cash method of accounting
• The lender charged the normal amount for points
• The cash brought to closing was at least the amount of points charged by the lender
• The points were calculated as a percentage of the loan
• Your closing documents clearly shows how much you paid in points

Prepaid interest

Prepaid interest is the amount of interest paid to cover the period between closing and your first payment.

Property taxes

The state and local property taxes you pay are deductible in the year you pay them. The maximum a married couple can deduct is $10,000 ($5,000 for single) per year for property tax, sales tax, and state and local income tax combined.

Origination fees

The fees the lender charges to underwrite and process your loan, the IRS considers these fees the same as points, making them tax-deductible. These fees can even be deducted if the seller pays them.

Mortgage insurance premiums

The IRS considers four different types: private mortgage insurance (PMI), VA funding fees used for VA loans, USDA guarantee fees towards a USDA loan, and FHA up-front premiums used with FHA loans. This deduction is also dependent on certain income limits. You cannot claim this deduction once your adjusted gross income (AGI) exceeds $109,000.

Closing on your new home

As you can see, closing costs and taxes can cover a wide range of different fees and expenses. In fact, the average buyer will pay between 2-5% of their loan amount in closing costs.

At Hero Home Programs, we understand how intimidating the home closing process can be, and our team is here to help walk you through the process and ensure everything goes smoothly. To learn more, visit us online today.

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FMERR Program: All You Need to Know

Homeowners looking to change their mortgage terms or reduce their interest rates often turn to home refinance loans. Unfortunately, many homeowners find that their homes have dropped in value or live in an area where home values are stagnant. This often means that the homeowner has lost value in their home, and they do not have enough equity to qualify for a standard refinance loan.

The good news is, for those sitting underwater when it comes to home equity, refinance programs, such as the Freddie Mac Enhanced Relief Refinance Program (FMERR), can offer assistance. Here we take a closer look at the program, including FMERR qualifications and eligibility.

What is Freddie Mac Enhanced Relief Refinance (FMERR)?

In areas where the housing market has dropped or remained stagnant, homeowners often find they do not have the equity available in their homes to qualify for a traditional home refinancing mortgage. Created by Freddie Mac, the Freddie Mac Enhanced Relief Refinance (FMERR) program was created to help homeowners with little to no equity in their homes qualify for refinancing. This means that, even with no equity, homeowners can qualify for refinancing at lower interest rates as long as they meet certain other guidelines.

Who qualifies for the FMERR Program?

While home equity is not a requirement for the FMERR program, there are other qualifications that you must meet to qualify and receive loan approval.

1. Loan owned by Freddie Mac

To begin applying for an FMERR loan, Freddie Mac must own your current loan. Because Freddie Mac is taking the risk on this high LTV loan, they limit their program to the loans they originally approved.

For loans owned by Fannie Mae, there is the HIRO program. If you have an FHA, VA, or USDA home loan, a Streamline Refinance loan is your option.

2. Date of loan originations

Your current loan must have an origination date on or after November 1, 2018, to qualify for the FMERR program. In addition, your current mortgage must be at least 15 months old before you can qualify.

3. Loan-to-value (LTV) ratio

Applying for a traditional refinance loan requires a maximum loan-to-value (LTV) ratio to qualify. In contrast, the FMERR has a minimum LTV requirement. For example, you must have an LTV ratio of 97.01% or higher for a single-unit primary residence. In other words, you need to have less than 3% equity in your home to be approved.

3. Debt-to-income (DTI) ratio

Unlike traditional mortgages, there is no maximum debt-to-income (DTI) ratio to be eligible for FMERR refinancing. The new loan is designed to replace an existing loan and often reduces the existing monthly payments. However, lenders must prove a 45% DTI if the payment increases by 20% (this can occur when you switch from an adjustable to a fixed-rate mortgage).

4. Net tangible benefit

The point of any refinance loan is to achieve a benefit, and the FMERR program is no different. Refinancing with the FMERR program must offer at least one of these financial benefits to qualify:

• Lower interest rate
• Reduced monthly payment
• Improvement in mortgage terms
• Change from an adjustable rate to a fixed-rate mortgage

5. Good payment history

Your payment history matters when it comes to an FMERR loan. You must have no 30-day last payments within the past six months and no more than one 30-day late payment within the last 12 months.

6. Credit score

Technically, there is no minimum credit score requirement for the FMERR loan as it is replacing your previous loan with new financing. However, some lenders can establish their own requirements, run a credit score, and have a minimum score requirement.

Should you apply for the FMERR program?

If you are looking to reduce your interest rates or find a mortgage with better terms, then a mortgage refinance is your best option. If you are sitting with little to no equity in your current home, choosing the FMERR program may be your only option.

But what are the pros and cons associated with an FMERR loan?

Pros

• LTV value: Unlike traditional refinancing programs, FMERR allows for refinancing with a much higher LTV ratio and even refinances when you owe more than the current value of your home.
• Save money: A net tangible benefit is a qualification for this program, so you must benefit financially by refinancing. This can be a lower rate, lower monthly payments, and a shorter loan term.

Cons

• Upfront closing costs: As with any mortgage or refinancing, you will be required to pay closing costs on your FMERR loan. This can amount to thousands of dollars, so you will need to budget this expense.
• Limited ARM terms available: While most people choose a fixed-rate FMERR loan, adjustable-rate mortgages are an option but are limited to 5/5, 5/1, 7/1, 10/1, 5/6-month, 7/6-month, or 10/6-month terms.

Refinance your home even when you don’t have the equity

If you are looking to save money or improve the terms of your current mortgage but have limited equity in your current home, a Freddie Mac Enhanced Relief Refinance (FMERR) loan may be the perfect solution.

At Hero Home Programs, we understand how intimidating the home refinancing process can be. Our goal is to help everyone reach homeownership and maintain it at the rates they can afford.

Visit us online today to learn more about how we can help you navigate your home refinancing and find you the best possible rates and programs.

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Can You Get a Second Home Mortgage With FHA?

Many assume that FHA loans are only for first-time homebuyers. While first-time buyers do make up the majority of borrowers that take advantage of these loans, the fact is many borrowers who already own a home or have in the past can take advantage of the benefits associated with an FHA loan.

But can you buy a second home with FHA? While buying a second home with FHA is possible, there are some considerations. Here we take a closer look at the FHA and how it can benefit you when buying a second home or even an investment property.

What is an FHA loan?

An FHA loan is a mortgage loan backed by the U.S. Federal Housing Administration. These loans require lower minimum credit scores and smaller down payments than traditional mortgage loans. While the federal government insures these loans, they are actually administered by FHA-approved lenders. These loans are designed for those who may not qualify for more conventional mortgage loan options.

Can you use an FHA loan on a second home?

An FHA loan is designed to be used to purchase a primary residence. However, there are circumstances when you can purchase a second home with an FHA loan. For example, if you already own a home with an FHA loan but no longer live in it, such as through a divorce, you may be eligible for a second home purchase. Also, if you had a home with an FHA loan and decided to keep that home as an investment and rental property, you could qualify for an FHA loan for your new primary residence.

Before diving into more occasions when you may qualify for a second home FHA, let’s look at the eligibility qualifications for an FHA loan.

Eligibility

• You must have a credit score of 500-579 with a 10% down payment or a score of 580 and above with a 3.5% down payment.
• Verifiable 2-year employment history
• Verifiable income with pay stubs, tax returns, etc.
• Front-end debt ratio of no more than 31% of gross monthly income
• Back-end debt ratio of no more than 43% of gross monthly income
• You must wait two years after a bankruptcy or three years after a foreclosure before applying

Requirements

• FHA approved appraisal that meets the HUD guidelines
• Purchasing a primary residence
• Maintain FHA mortgage insurance on the loan

Aside from these basic FHA requirements, there are other requirements when using an FHA loan on a second home. These can include higher down-payments, higher minimum credit score requirements, and a cash reserve.

Can you have more than one FHA loan at the same time?

While you can qualify for an FHA loan more than once, you can only have one FHA loan at a time under general circumstances. However, there are four scenarios where you may qualify for a second FHA loan while still paying for your first property and FHA loan.

• Job relocation: If you are changing jobs and require a relocation over 100 miles from your current primary residence and do not want to sell your current residence, you may qualify for a second FHA loan to purchase your new primary residence.
• Leaving a joint-owned property: Oftentimes, especially during a divorce, you may be the co-owner of a current home where you no longer reside. In this case, you may qualify for a second FHA loan for your new primary residence.
• You were a cosigner for another property: If you acted as a cosigner for someone else to purchase a home with an FHA loan but never lived in the said home, you may qualify for an FHA loan to purchase your primary residence.
• Growing your family: If your current home no longer meets the needs of your growing family, you may qualify for a second FHA loan to purchase a new primary residence and maintain your first home as a rental property.

Can you purchase an investment property with an FHA loan?

FHA loans are designed to purchase primary residences and not second homes or investment properties. As shown above, there are some scenarios where it is still possible to buy a second property as a primary residence, leaving your first home as an investment property. There are two other times where an FHA loan may be used to purchase investment properties.

• Refinancing an existing FHA loan: Using a streamline refinance, you can refinance an existing FHA loan on a home you no longer live in as long as it lowers your monthly principal and interest payments.
• Multi-family properties: You can qualify for an FHA loan for a multi-family, such as a duplex, as long as one of the units will be used as your primary residence.

Applying for an FHA loan on the second home mortgage

Before you consider applying for an FHA on a second home mortgage, you will want to focus on boosting your credit score and increasing your cash reserves. In addition, start with an FHA mortgage calculator to see how much you can afford when it comes to a second home and what specific qualifications you may need.

Financing your second home with FHA

While financing a second home with an FHA loan is not common, it is still possible. When you purchase the second home as your primary residence, it gives you a second investment home that can add to your overall net worth.

However, at Hero Home Programs, we understand how confusing the home buying process can be. We can help you navigate the FHA home buying process and help ensure you meet the qualifications for a new FHA loan when needed. To learn more about Hero Home Programs and how we can help, visit us online today.

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Your Complete Guide to Mortgage Loan Documents Checklist

When you buy a home, the necessary paperwork for a mortgage application and underwriting can often seem overwhelming. Having a mortgage loan closing documents checklist can help make this process easier and help ensure you have everything ready before it is needed.

Here, we provide all the typical loan information necessary for your application and home closing.

Loan application information

When applying for a home mortgage and going through underwriting, your mortgage lender will need to take a deep dive into your personal and financial life. Unfortunately, this is necessary to help ensure you meet all the necessary loan requirements and guidelines and that you are in the position to afford your monthly mortgage payments. Knowing what information may be required in advance allows you to make sure you have all the necessary paperwork you may need ahead of time to help speed up the process and get you into your new home sooner.

Personal identification

To begin with, you will need to provide personal identifying information. This will include photo IDs and social security cards for every person on the mortgage. You may also need to provide information regarding your marital status and the number of children you have, as well as their personal information.

If you are not a U.S. citizen, you may need to provide proof of permanent residence and immigration status. It can include a copy of your green card, employment authorization documentation, or your approved visa.

Employment and income history

In order to prove that you can make your monthly mortgage payments and afford the amount of your home loan, the lender is going to require documents that confirm your employment and income history. This can include pay stubs from your employer for at least the last 30 days, W-2 forms from the last one to two years, and your income tax returns for the last two to three years.

If you are self-employed, most lenders require at least two years of a steady income in the same self-employment industry. Proof of this can come from client contracts or letters from your current clients. If you own a business, you will need to provide your business license and proof of insurance, as well as at least two years of tax returns, both personal and business.

Profit and loss statements

If you own a business, in addition to the information listed above, you will also need to provide a cash-flow analysis and a year-to-date profit and loss statement verified by a certified accountant.

Bank statements

Your lender will want to ensure that you have the assets available to cover your down payment and closing costs, as well as maintain cash reserves if they are required. To show this, you will need to submit bank statements for at least two to three months.

Investment account statements

If you plan to use money from an investment or retirement account to cover your down payment or closing costs, you will need to provide statements from all these possible accounts. This can include retirement accounts, 401(k) plans, stocks, and certificates of deposit.

Gift letter

If a family member is gifting you the money for your down payment, you will need to acquire a gift form and letter ensuring that this money is a gift and not a loan that is expected to be paid back.

Assets and liabilities

Lenders will need to calculate your debt-to-income ratio to ensure that you have the financial ability to make your monthly mortgage payments. To do this, you will need to provide your bank investment account statements and proof of all debts, such as auto or student loans, credit cards, personal loans, and any other regular expenses.

Credit history

The lender will need to check your credit history, though you are not required to run and submit your own credit report. Instead, your mortgage lender will ask for your permission to run a credit check. If you have a thin credit history, they may ask for alternative credit data, such as utility bills, rent history, cable bills, and more.

Rental history

Some lenders will require you to provide a rental history to show proof of regular monthly housing payments. This can include a list and contact information of your landlords over the last two years.

Signed sales contract

You will need to provide a signed copy of the sales agreement between you and the seller. It is the document that shows the purchase price and all the home details. It also includes the terms you and the seller agreed to.

Proof of additional income

If you rely on additional income, such as alimony or child support, you will need to provide documentation on the amount and duration of these payments. In many cases, this will require a copy of the court order.

Bankruptcy documents

If you have a bankruptcy on your credit history, you will first need to talk with your lender about how long you need to wait before considering a mortgage. You will need to prove that all debts are discharged and no longer outstanding. In addition, if you had a previous foreclosure in your bankruptcy, you may have to wait seven years before you are eligible for a mortgage.

Divorce decree

If you are divorced and pay or receive child support or alimony, your lender is likely to require a copy of your divorce decree to provide proof of income or liability.

Checklist helps

As you can see by the checklist, the required documents and information associated with the home loan process can be overwhelming. At Hero Home Programs, our goal is to help everyone reach homeownership. We research all the available home loan products and discounts you may be eligible for and help walk you through the lending process.

To learn more about how we can help you get into the home of your dreams, visit us online today.

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What is HIRO Mortgage Program?

If you are looking to change your mortgage terms or lower your interest rate, you may consider a home refinance loan. This is a wonderful option for many. However, what if you live in an area where the property values have dropped? A traditional refinance loan requires a minimum of the existing home equity, and many find that they do not qualify because of depressed property values.

The good news is the HIRO loan program is a government refinance program that offers an alternative refinancing option. Here we take a closer look at the HIRO program, how it works, who can qualify, and any other alternative options available to you.

What is the HIRO Program?

The Fannie Mae High Loan-to-Value Refinance Option (HIRO) is a program designed to help homeowners in areas where the property values are stagnant or even falling. In these areas, many homeowners lost equity in their homes, leaving them ‘underwater.’ The goal of the HIRO program is to provide loans to these homeowners, allowing them to refinance into a lower interest rate and monthly payment.

How does the High LTV Refinance Option (HIRO) Program works?

Traditional refinance loans require you to owe less than 80% of your home value. The HIRO loan program lets you refinance with a much lower loan-to-value (LTV) ratio. In fact, there is no maximum ratio if you refinance into a fixed-rate mortgage. There are also some differences regarding how a HIRO loan works.

Let’s take a closer look.

Income verification

Refinancing with HIRO still requires a completely new mortgage and a similar application process. However, this application process offers much more flexibility than traditional mortgage applications. For instance, in many cases, income verification, employment verification, asset checks, and home appraisals are often not necessary. This is partially due to the initial eligibility requirements for the HIRO program, which we will discuss below.

In addition, there are no credit score requirements to qualify for a HIRO loan. As it is intended to replace your current loan, lenders are not required to pull a credit report or require a minimum credit score. There is also no debt-to-income ratio ceiling that must be met for the HIRO program.

Rates

Interest rates for any loan are based on the risk posed by the lender. Because you have little to no equity in the home when you apply for the HIRO program, the lenders are taking higher risks than with other refinance loan options. For this reason, HIRO loans often have a slightly higher interest rate than traditional refinancing options.

Who qualifies for the HIRO mortgage program?

If you are considering a HIRO loan, you must meet several qualifying factors to be eligible.

• Your original mortgage must be dated October 1, 2017, or later
• Your existing mortgage must be at least 15 months old
• All payments must be up to date on your current mortgage. This means no late payments within the last six months and a maximum of one late payment in the last year.
• Your current mortgage must be first-lien financing and not a second mortgage.

Key qualification factors

In addition to the requirements listed above, the HIRO program also has additional key qualification factors for program approval.

1. Fannie Mae backs current mortgage

Because Fannie Mae backs the HIRO program, their first key qualification factor requires that Fannie Mae back your current mortgage. Given that they are taking the risk on this high LTV loan, they want to limit the program to loans they originally approved. If Fannie Mae does not back your current loan, there are additional alternatives we will discuss below.

2. Minimum and maximum LTVs

Traditional refinance loan options require a maximum LTV ratio to qualify. However, as we mentioned, the HIRO program does not have a maximum limit. They do, however, have a minimum LTV ratio. This minimum varies based on the property type. For example, the LTV for a 1-unit primary residence is 97.01% or higher. A 1-unit second home has a minimum LTV of 90.01% or higher, and a 1- to 4-unit investment property has a minimum LTV ratio of 75.01% or higher.

3. Net tangible benefit

The final key qualification factor for the HIRO program is the loan must provide you with a net tangible benefit, meaning you must gain an advantage by refinancing your mortgage.  Examples of a net tangible benefit include:

• Lower interest rate
• Lower principal and interest payment
• Reducing the terms of your loan
• Changing from an adjustable-rate mortgage to a fixed-rate

When should you seek a high LTV refinance?

If you are interested in achieving any of the net tangible benefits above, such as a lower interest rate or shortening the term of your loan, then a mortgage refinance loan is a great option. If the amount of equity in your home is not enough for a traditional loan, then a HIRO program loan offers you the perfect solution.

Alternatives for HIRO Program

Because the HIRO program requires current loans backed by Fannie Mae, it is not open to all homeowners. There are, however, similar programs designed for those with loans backed by Freddie Mac or FHA, VA, and USDA borrowers.

Freddie Mac Enhanced Relief Refinance (FMERR)

The Freddie Mac Enhanced Relief Refinance (FMERR) program is very similar to the HIRO program, with the main difference being it is for those with current loans backed by Freddie Mac. Also, one important requirement is that your current loan must have been originated on or after November 1, 2018.

Streamline refinance

Streamline Refinance is a refinancing option for FAH, VA, or USDA home loans. This loan option works for those with little to no equity in their home requires no credit check or income verification, and follows the basic qualifications of the other programs.

Conclusion

A HIRO loan is a great option for those with little to no equity in their home refinance to reduce their interest rate or monthly payments. At Hero Home Programs, we understand how intimidating the home loan refinancing process can be to homeowners, and we are here to help.

Contact us online today to learn more about how we can help you navigate your refinancing and make the most of your homeownership.

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Home Loans for Paramedics and EMTs

Emergency medical service (EMS) personnel, such as paramedics and emergency medical technicians (EMT), selflessly give their service to protect and take care of their community every day. Unfortunately, homeownership is often just out of reach despite the vital role they play. However, thanks to special EMS mortgages and mortgage loans for paramedics, many first responders can achieve the dream of homeownership.

Difference between paramedics and EMTs

When it comes to EMS personnel, there are different levels of certification. These certification differences affect the level of care that responders can provide to community members. To better understand the differences, we look at both paramedics and EMTs.

Emergency Medical Technicians (EMTs)

The role of an EMT is to assess a patient and determine if there are any life-threatening injuries or illnesses. Their treatment options focus on basic health procedures, such as CPR, oxygen administration, stabilizing and splinting injuries, or administering epinephrine for an allergic reaction. To become an EMT, you do not need a college degree but rather complete an EMT training program requiring at least 170 hours of education.

Paramedics (PM)

Paramedics are licensed, pre-hospital service providers providing many of the same medical treatments that emergency room staff can. This can include administering medications, starting IV lines, providing airway management, EKG administration and interpretation, and much more. Paramedic training is a college degree program that can take up to two years and include 1,000 to 2,000 hours of training to complete. In many cases, these programs require a college-level anatomy and physiology course before acceptance.

Home buying challenges for first responders

Despite providing life-saving services to the community, wages for EMTs and paramedics often keep homeownership out of reach. According to a 2021 EMS1 survey, more than half of EMS personnel work more than one job. This is despite 63% working more than 50 hours a week and 21% working more than 70 hours a week.

In addition to the mental and physical stress of the job, the inability to make a living wage often leads to burnout. Unfortunately, it usually keeps many EMS personnel from owning their own home.

Home loan programs for EMS providers

The good news is there are many different home mortgage programs available for first responders, including EMTs and paramedics. These programs offer everything from down-payment assistance to reduced fees and grants to help with the down payment.

Here we take a closer look at some of the available assistance options.

Hero Home Programs – First Responder Home Loans

Hero Home Programs and their First Responder Home Loans is a comprehensive program that works with first responders to find all the possible home assistance programs they are eligible for. They research all the possible programs available to you, including down payment assistance, low-cost mortgages, and federal and local grants that are often available for first responders. Once they locate all available options, they also work with you to find the best financing options that complement the additional benefits, making your home buying and financing process much easier, with less work for you to do.

Advantages

• Research is done for you, meaning less work for you
• Credit on closing
• Additional vendor discounts
• They find all available rebates and grants
• Low-rate mortgage loans
• Maximum savings

Eligibility
The Hero Home Program is open to all EMS personnel and first responders.

FHA Loans

A Federal Housing Administration (FHA) loan is insured by the Federal Housing Administration and offered by approved lenders. These loans only require a 3.5% down payment and are designed for low to moderate-income earners.

Advantages

• Small down payments
• Flexible qualifications, with the main requirements being good work. and credit history
• Acceptance of lower credit scores

Disadvantages

• Upfront Funding Fee: This is a fee of 1.75% of the total amount financed. This fee can be paid upfront or rolled into your monthly mortgage payment.
• Mortgage Insurance Premiums (MIP): MIPs are required for the life of all FHA loans.
  It will cost more over the life of the loan.

Eligibility
To qualify for an FHA loan, you must have a verifiable employment history, a credit score between 500-579 for a 10% down payment or over 580 for a 3.5% down payment, and have the home appraised by an FHA-approved appraiser.

HUD Good Neighbor Next Door

The Good Neighbor Next Door program is offered by the Department of Housing and Urban Development (HUD). This program provides homes to first responders at 50% off the listing price. This means if you find a home for $200,000, you will pay monthly mortgage payments of just $100,000. This only applies to select homes in revitalized communities.

Advantages

• Purchase a home for half the asking price

Disadvantages

• Limited selection of homes available for the program
• If multiple people apply for the same home, the applicant chosen is determined by a randomized lottery
• Must stay in the home for a minimum of 3 years

Eligibility
You must be employed full-time as a firefighter, EMT, paramedic, or law enforcement officer with a fire department, EMS unit, or law enforcement agency.

Firefighter Next Door® First Home Buyer Program

If you are a first-time homebuyer or have not owned a home in the past three years, you are eligible for the Firefighter Next Door First Time Home Buyer Program. With this program, you can purchase any home on the market, and you may also be eligible for the Firefighter Next Door Grant and additional down payment assistance.

Advantages

• No application fees or up-front costs
• Easy application process
• Low down payment options
• Grants up to $8,000
• Down payment assistance up to $10,681.00
• Preferred interest rates
• Free appraisal
• Free homebuyer representation
• Discount title fees

Eligibility
The Firefighter Next Door First Time Home Buyer Program is open to all firefighters and first responders, including EMTs and paramedics.

Home buying made easier with Hero Home Programs

As you can see, there are many potential programs available to help first responders achieve their dream of homeownership. At Hero Home Programs, we want to help all those who serve our community, including EMTs and paramedics, navigate the home buying process and find all the possible assistance they can to help achieve their goal of owning a home.

Contact us online to learn more about how we can help you move into your new home for as little as possible.

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Federal Government Employee Mortgage Programs

The home buying process can be stressful for everyone and, in many cases, may seem intimidating. This is especially true for first-time homebuyers.

However, as a government employee, you are eligible for many different home mortgage programs that can make the buying process so much easier and have you enjoying homeownership in no time at all. From special federal employee mortgage loans to mortgage assistance and grants, these programs can save you thousands of dollars and make the home buying process more attainable.

Let’s look at just how these programs work and who is eligible.

Who is a federal government employee?

Government employees are anyone who works for the federal, state, county, or city government. These can include employees from federal government agencies, such as the Department of Agriculture, to librarians and park rangers. In many cases, this also includes teachers in public education and those working in healthcare.

Home buying challenges

While working in many of these professions is rewarding, it can also contribute to financial challenges, making homeownership a little more difficult and often out of reach. Some common challenges associated with government employee positions can include salary limitations and frequent relocations.

1. Salary limitations

For most private sector positions, you can shop around for positions that offer a higher salary and, in most cases, you can expect regular raises and evaluations that contribute to an increase in income. Unfortunately, as a government employee, you may not make as much as those in similar private-sector positions, and salaries are often capped, so room for growth is not always possible. This can make it difficult to save the money necessary for a down payment on a home.

2. Job locations can change frequently

If you work in the military or other areas of the government, relocation is often a part of the job description. This can make it difficult to commit to owning a home. However, you must keep in mind that homeownership is a way to build your assets. While you may need to relocate, you can rent your home out to tenants who will, in the end, pay your mortgage for you.

Public Servant Next Door® First Time Home Buyer Program

Administered by the Teacher Next Door® National Home Buying Program, the Public Servant Next Door program provides grants and down payment assistance to those buying their first home or those who have not owned a home in over three years.

Benefits for first-time homebuyers

If you are a first-time homebuyer, this program offers a wide range of benefits, including:

• No application fees
• No up-front fees
• Easy application process
• Simple Docs Program
• Low down-payment options
• Purchase any home on the market
• Specific loans for first-time buyers
• Preferred interest rates
• Free appraisal
• Free homebuyer inspection
• Discount title fees

Eligibility

The Public Servant Next Door® program is open to all government employees, including city, county, state, and federal agencies. This includes a wide range of positions but is not limited to:

• Administration
• Clerical and office staff
• Engineers and architectures
• Facilities staff
• Computer and IT specialists
• Transportation
• Legal services
• U.S. Postal Service employees
• Inspectors
• Human resource management
• Park rangers

Government employee housing grants

In addition to down payment assistance of up to $10,681.00, the Public Servant Next Door® program also offers all government employees a housing grant of up to $8,000.00 for the home purchase. This is a non-repayable grant.

Mortgages for Champions

Mortgages for Champions is a program offered through RealFi Home Funding Corp. It was created as a thank-you to all the heroes in the community, including all government employees. This program offers the elimination of all lender’s fees and closing costs, which, in many cases, can save home buyers up to $1,700.00 or more.

Benefits for first-time homebuyers

Mortgages for Champions offers the elimination of lender’s fees and closing costs for first-time homebuyers, including:

• No application fees
• No processing fees
• No underwriting fees
• No commitment fees

Eligibility

Mortgages for Champions is a program designed to help those that help the community, including government employees, as well as:

• Educators
• EMTs
• Firefighters
• Law enforcement officers
• Medical personnel
• Military personnel

Mortgage programs can help you get your first home

Many government employees do not know about the many programs available to help during their homebuying process. The Public Servants Next Door® and the Mortgages for Champions programs are only a couple of the many programs that may be available to help you achieve your dream of homeownership.

At Hero Home Programs, we understand how overwhelming the home buying process can be. Our teams will do the research for you and find all the programs you are eligible for to help you save thousands on your home purchase and allow you to purchase the home of your dreams.

Visit us online today to learn more about how the Hero Home Programs work.

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