Niche Mortgage Programs That You Didn't Know Existed

by APSense News Release Admin

Most people are familiar with the basic type of home loan, or mortgage loan. This is where a person or married couple pay a little bit of money upfront, sign some papers and move into the home as their new residence.

However, there are other ways to buy a home that is not as common nor as well known.

Listed below are some of the most unique mortgage loans that you did not know existed.

Buying a Home that is NOT for You AND it is NOT a Rental Property

When people are discussing or planning on a home purchase, it usually falls into one of two categories, either their main home or a rental property.

For the upper crust of society, there are also vacation homes at the beach, in the mountains, and in other wonderful places.

But there is a way to buy a home that does not fall into any of the above categories.

For example, a person can buy a home on behalf of their elderly parents.

The person is not required to live in the home at all. The elderly parents are not required to make any payment on the home. And the interest rate for the loan is very similar to the rates for buying a home using FHA or Fannie Mae.

This loan program is known as the Family Opportunity Loan. It is a way for people to purchase a home for their parents to keep them close by and provide care for them.

The requirements for the loan are very similar to most other loans. Borrowers will need to provide proof of income, submit to credit screening and be able to afford the new house payment along with their current debt without putting a financial strain on them.

This same program can also be used by people to buy a home for their adult children with special needs. Once again, the child will not have to make payments and the child’s credit score is not a factor in getting approved for the loan.

This type of loan gives people a choice between using services like a nursing home and assisted living facility or using their own time, energy, and resources to provide care for their loved ones in their time of need.

Having Two Loans from the Veterans Administration at the Same Time

The VA home loan is very clear in its rules; a qualified veteran may only use the VA home loan program to buy their main residence. The loan cannot be used to buy an investment property or a vacation home, like a house at the beach.

That sounds like veterans can have only one VA home loan at a time. But this is not the case.

Thanks to the Second Tier Entitlement, it is possible to have VA mortgages on a pair of separate properties at the same time.

However, there is a catch to this rule.

The VA only approves a 2^nd mortgage on a separate property in very particular situations. Most notably, the veteran that has purchased a home near one base gets transferred to another base. Instead of selling the first home and then buying a new property near the new base of operations, the veteran keeps the first home and leases to a needy person or family.

It is important to note that the veteran will need to be able to pass the income requirements to keep the mortgage on the first home while applying for a mortgage on the second home.

Using Bank Statements, Instead of Paystubs, To Prove Income for a Home Loan

With the majority of mortgage loans, the lender will ask the borrower to provide paystubs, W-2 forms, and even tax returns from the past 2 years to prove their monthly and yearly income.

For some self-employed people, this may not be an option. Most companies operate under a simple rule: generate as much revenue as possible and then spend the money on the business to limit the amount of taxes paid yearly.

But this may show very little, or no profit, on the tax returns. Lenders frown on handing over money to purchase a home for someone working for a business that seems to be barely above the break-even point.

Thankfully, cash is still king. While a tax return may follow a strict code of rules and lead someone to believe a borrower is barely surviving, a simple bank statement can prove not only how much money is coming monthly but how wisely, or poorly, the person is spending the money.

By proving that there is a regular flow of cash coming in every month, a self-employed person has a chance of buying a home.

This method is called the bank statement loan, and it works very simply. The lender will review the amount of money deposited each month for at least 12 months, sometimes up to 24 months. The average monthly income will be compared to the borrower’s debt payments. As long as the borrower meets the debt-to-income ratio for the loan, they should have a strong chance of getting approved for the loan.

There are a few extra rules to keep in mind with the bank statement loan.

· Most lenders will require a minimum credit score just to qualify for the mortgage.

· They may also ask for proof of cash reserves. Each loan is different, but the cash reserves requirement could be as small as 2 months and as much as 6 months.

· There will likely be the need for a considerable down payment, somewhere between 10% and 25% of the home’s asking price.

Your lender can review these and other requirements with you to see if this is a good fit for your current needs.

Summing Up Niche Mortgage Loans

These are the top 3 mortgage loan programs that you may not have heard about in the recent past. They are distinct in the fact that each mortgage may apply to a very different situation. But they also present an option for people to buy a home that is not a traditional type of transaction.