New Hampshire Mortgages
There are a variety of different mortgages available to New Hampshire residents and some of these are only available to NH residents. Here is an overview of some of the more common loans.
Home Flex Plus and Home Preferred Plus
These programs are offered through the state of New Hampshire’s Housing authority or the New Hampshire Housing Finance Authority. These mortgages are an FHA or VA program and offer a 3% down payment and closing costs cash assistance. This can be a great way to help with the down payment needed to buy a home.
If you’re income is around 80% of the median salary for your area there the Home Preferred options can be used with a discounted mortgage insurance premium.
Our Home Preferred provides 97% LTV conventional mortgage financing with a low, discounted mortgage insurance options. This will save you a lot on your monthly payment.
The Purchase Rehab Loan is available to borrowers with incomes up to $135,300 with 3.5% down. This is a great option backed by FHA that you can use to fix up a property and get it up to FHA standards. No major construction on this type of loan, you won’t be able to put an addition on but you can do pretty much any upgrades and repairs inside the home, new furnace, add central ac, new floors, paint, etc. You can finance up to $35,000 on top of the purchase price of the home. These types of loans you have to hire a contractor to do the work, they are not available for you to do the work yourself.
A note about New Hampshire Contractors is that there is no official general contractors license in NH like there is in Massachusetts. If your contractor is from Massachusetts they will be required to have a license in most cases. In either case, your contractor will have to provide liability insurance for the job, a written estimate will be necessary and will also help protect you, the mortgagee. The written estimate will need to include a 20% buffer for unforeseen issues that may come up. Lot’s of things can happen when you start opening up walls and floors, so the bank wants to make sure you have the money for the additional repairs.
Half of the written estimate is paid up front and the other half is paid upon completion of the work. Only after the work has been verified by an inspector from the FHA and a written and signed invoice with the work performed is signed and notarized.
Federal Housing Administration or FHA
An FHA mortgage is one of your most common options providing a low down payment of 3.5%. Credit requirements are also less strict and you can often qualify with a minimum credit score of 580. The debt to income requirements are also the most relaxed and in some cases you can stretch your budget up to 58% DTI allowing you to qualify for a much higher amount. Lenders will typically use the middle score out of all three credit bureaus, Equifax, Experian and TransUnion. If you need a copy of your credit report to review please reach out and I can give you a code to pull your credit report for free.
The Federal Housing administration guarantees this loan but also requires Primate Mortgage Insurance for any loans under 80% LTV (Loan to Value). In order to get the lowest monthly payment a conventional mortgage with 20% down may be your best bet, more on that below.
Veterans Administration or VA
VA Mortgages in NH are also guaranteed by the Veterans Administration and such allows the lender to offer more flexible terms. Some of the main benefits that make VA loans great are the the ability to finance 100% of the loan amount aka 100% LTV. Unlike an FHA mortgage, VA mortgages do not have added private mortgage insurance, saving you a good chunk of change on your monthly payment. Qualifying for a higher amount can sometimes be a challenge as the VA has tighter debt to income requirements and are usually around 43%, vs FHA you can go much higher.
In order to qualify you must be a Veteran, a service member or in some cases a surviving spouse. VA has a funding fee that will be part of your closing costs. The fee is to helps to lower the costs of the loan for US taxpayers.
The VA funding fee can be waived if you meet certain criteria
- Receiving VA compensation for a service related disability
- Eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead
- The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you’re receiving Dependency and Indemnity Compensation (DIC)
- A service member with a proposed or memorandum rating, before the loan closing date, saying you’re eligible to get compensation because of a pre-discharge claim
- A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart
Attention veterans, I am am now part of the Homes for Heroes New Hampshire program. I can provide significant discounts and get Veterans money back after closing. I can even get you paid to buy a house!
USDA Loans
The United States Department of Agriculture has a great option if you are purchasing in a rural area i.e. outside of a major city. This is actually one of the best loans you can get because of the terms they offer. They offer 100% financing for starters. The USDA guarantees all loans against default and therefore lenders can take on more risk and offer purchasers great terms such as low interest rates.
USDA loans do not have Private Mortgage Insurance, similar to VA loans. There are two fees that you need to be aware of with a USDA mortgage. They are the upfront guarantee fee that is paid once when you close on the loan. This is the lowest funding fee of all the government-backed loan products.
There is also an annual fee that is paid monthly as part of your mortgage payment. The upfront fee is 1 percent of the total financed amount while the annual fee is 0.35 percent of the loan’s current balance. Based off of Hillsborough County’s Median Sales price in April 2020 of $352,750 the upfront fee and part of your closing costs would be $3,527 and the monthly portion is about $100.
If you want to see if a property is eligible for a USDA loan you can access the USDA Eligibility Database here, plug in the home you are looking at and you will see if the property qualifies for this type of funding. Even if the home is in a city or close to the outskirts of a city, do double check as these can still be eligible. Income limits may also apply depending on the area.
Conventional Mortgages
Conventional mortgages are available with different down payment options. To get the lowest monthly payment, you will want to put 20% down, this will enable you to avoid paying Private Mortgage Insurance and significantly reduce your monthly payment. Fannie and Freddie Mac also have a 3% down and 5% down option with PMI that can be cancelled after your each 80% LTV. These mortgages are called the HomePossible and HomeReady. Income limits do apply to the lower down payment options. Better credit is typically required with conventional mortgages and would typically need to be 680 or greater.
That is your update on the most common types of loans available to New Hampshire residents. Please consult with your mortgage broker or loan officer to discuss what options might be best for you. If you would like a referral to a local, trusted lender please reach out and I will be glad to set you up with someone I work with regularly who can surely get the job done.
References
http://gonewhampshirehousing.com – New Hampshire Housing Finance Authority
http://va.gov – U.S. Department of Veterans Affairs
http://usda.gov – U.S. Department of Agriculture
Homes for Heroes NH– Program to provide discounts and cash back to local heroes, veterans, teachers, firefighters, police officers, EMT’s and healthcare workers
