Flex 97 First Time Home Buyer Home Loans and Mortgages

The Flex 97 is a conventional fixed rate home loan that is designed to assist first time home buyers with flexible mortgage qualifying terms.  The loan is a fixed rate mortgage in which the monthly payments remain the same over the life of the loan.  Once the mortgage is in effect, the interest rate does not fluctuate but remains constant.

The 30 year fixed rate loan is one of the most commonly used mortgages for residential financing in America.  The greatest advantage for a home buyer is the predictability of the payments each month because it never changes.  This type of loan is often recommended for home buyers living on a fixed income, a set budget, or those planning on living in their home for more than five years.  If interest rates increase, the loan rate will remain the same.  Unfortunately should rates decline below the set interest rate on the loan, the only way to change it is to refinance the mortgage and incur a loss of equity or additional closing costs to take advantage of the lower interest rate. 

A few of the major differences, as noted below, allow the borrower to use gift funds for the entire down payment.  Also, the amount of mortgage insurance paid by the borrower per month is almost half of comparable conventional loan programs.  Furthermore, the qualifying ratios are higher than standard conventional loan programs.  

The following are highlights of this loan program:

Down Payment Requirements:  The minimum down payment required for this type of loan is 3% of the sales price for owner-occupied properties only.

Income and employment:  There are no limitations placed upon income requirements. As for employment, there are no limitations on a specific length of time at a particular job. However, a 2 year history is required, preferably in the same line of work (education can be counted towards this 2 year history if it is for the same profession the borrower is currently in).  

Eligible properties and occupancy requirements: Single family attached and detached homes, 2 to 4 unit properties, planned urban developments (PUDs), and Fannie Mae or Freddie Mac approved condominiums.  Second homes and investment properties are not eligible under this program.

Closing Costs:  Closing costs and prepaids may be paid by interested parties (i.e. seller) as long as they are considered in the contribution limitation.  For primary residences, the seller may contribute up to 3% of the sales price if the buyer is putting less than 10% down.  If the buyer is putting 10% or more down, the seller may contribute up to 6% of the closings costs.  

Assumability:  This type of loan is not assumable.

Pre-payment Penalty:  Not applicable.

Cash Reserves:   The borrower is required to have a minimum of two months cash reserves in the bank by the close of escrow.  

Gift Funds:  The Flex 97 allows the borrower to utilize gift funds for the 3% down payment.  The closing costs and prepaids may also be paid by a gift, unsecured family loan, secured 401K loan, etc. unless they are from a person involved in the transaction (Broker, Lender, etc.).

Credit Scoring:  Generally Fannie Mae and Freddie Mac require a minimum credit score of 620.   

Co-Signors (Non-Occupant Co-Borrowers):  Not allowed.

Qualifying Ratios:  Fannie Mae and Freddie Mac limit a borrower's monthly payment not to exceed 33% of their gross monthly income. A borrower's total debt (proposed monthly payment plus monthly payments towards credit cards, student loans, car payments, and other installment and revolving credit) cannot exceed 38% of their gross monthly income.  If compensating factors are present or if the borrower has an above average credit score, the stated ratios may be exceeded.

Mortgage Insurance:  Required for all purchases with a down payment less than 10% of the purchase price.   

The above guidelines are subject to change and should not be considered as exact rules for qualification.  Other factors may allow a borrower to compensate for deficiencies or to exceed the stated guideline.  You should talk with your loan officer about your specific situation to see if you qualify.