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How the Your Path Mortgage Program Works

How the Your Path Mortgage Program Works

    • Important Your Path Mortgage Program Considerations
    • Pros Cons
      • More flexible borrower qualification and reduced documentation requirements
      • Permits the use of alternate income sources to qualify for mortgage
      • Ability to purchase a home with a 3% down payment and no borrower contributiont
      • Potentially lower mortgage rate as compared to other conventional low down payment programs (depending on borrower income and property location)
      • Higher borrower income limit
      • Both first-time and repeat home buyers are eligible
      • No up-front private mortgage insurance (PMI) and potentially lower ongoing PMI cost as compared to mortgage insurance for an FHA loan
      • Twelve month pilot program
      • Program is only available through two lenders
      • Higher mortgage rate than government-backed low down payment programs mortgage programs (FHA, VA and USDA)
      • Limit on mortgage amount
      • Requires private mortgage insurance (PMI)
    • Your Path Program Overview
    • The Your Path Mortgage Program is designed to help individuals with low-to-moderate incomes or alternate sources of income qualify for mortgages. The program is offered through a collaboration between Freddie Mac, Alterra Home Loans and New American Funding. Freddie Mac is a government-sponsored enterprise that provides capital to lenders and works with lenders to develop mortgage programs for borrowers. Alterra Home Loans and New American Funding are lenders that focus on underserved borrowers, particularly minority populations.

      The Your Path Program is based on Freddie Mac’s low down payment Home Possible Mortgage Program. Like the Home Possible Program, the Your Path Program requires a down payment of only 3% and no personal financial contribution from the borrower to buy a home. Additionally, as outlined below, the two programs have many of the same borrower qualification requirements and program eligibility guidelines.

      Both programs also allow applicants to include income from non-borrower household members such as relatives or boarders to qualify for the mortgage or improve the borrower’s debt-to-income ratio, which may allow you to get approved for a larger mortgage. For example if you purchase a single family property and relatives or boarders intend to live with you in the property for at least twelve months then you can use the income from the individuals to qualify for the mortgage, even though they are not co-borrowers and do not own the home. Additionally, if you purchase a multi-family property (up to four units), the rental income from the units you do not occupy could help you qualify for the mortgage.

      Although there is significant overlap between the two program, the Your Path Mortgage Program offers several unique and innovative features intended to make it easier for borrowers to qualify for a mortgage. Key differentiators of the Your Path Mortgage Program include:

      • The ability to include borrower income from a second job with only twelve months of work history instead of two years of history
      • More options for self-employed borrowers to demonstrate their income
      • Enhanced flexibility to include income from seasonal employment
      • Reduced bank documentation required to demonstrate proof of a down payment

      These features, along with permitting non-borrower household income to be used to qualify for a mortgage, are designed to address the growth in multi-generational households as well as the increasing number of borrowers with non-traditional sources of income. By applying more flexible borrower qualification requirements, the Your Path Mortgage Program makes home ownership accessible to more people.

      The Your Path Program competes with conventional low / no down payment programs such as the HomeReady Mortgage Program, Bank of America Affordable Loan Solution Program and Wells Fargo yourFirst Mortgage Program as well as government-backed programs such as the FHA, VA and USDA programs. Be sure to compare and understand multiple low / no down payment mortgage programs to find the one that best meets your needs.

    • How the Your Path Mortgage Program Works
    • Borrowers apply for and obtain a Your Path Mortgage from Alterra Home Loans or New American Funding. Borrowers that qualify for the program are required to make a down payment of 3% of the property purchase price and decide if they want to make the down payment using their own funds or other sources. Borrowers that do not have sufficient personal funds for the down payment can combine the Your Path Program with a personal gift or down payment assistance grant to pay for all or part of the down payment and closing costs.

      Using a down payment grant or gift enables the home buyer to purchase the property with no personal financial contribution. For example, if a home buyer wants to purchase a $200,000 home, he or she could obtain a $194,000 Your Path Mortgage from one of the two participating lenders and a $5,000 down payment grant to buy the home with no personal financial contribution.

      Down payment assistance programs are typically offered by state and local housing agencies and commissions. Housing agencies and commissions are usually non-for-profit organizations that offer a range of home buyer assistance programs. Additionally, some companies also offer down payment assistance grants for employees.

      • Review information on down payment grants and other home buyer assistance programs by clicking STATE PROGRAMS

      Home buyers that want to use the Your Path Mortgage Program with a down payment assistance program should apply for the mortgage with Alterra Home Loans or New American Funding and also contact their local housing commission (or employer) to apply for the down payment grant. In some cases, Alterra or New American may recommend specific housing organizations for borrowers to work with and the housing organization may provide resources in addition to the down payment assistance program to help guide borrowers through the home buying process. If you are interested in the Your Path Program your first step is to contact Alterra Home Loans or New American Funding by calling, visiting their web sites or going to a local branch.

      Please note that the Your Path Program is only available in states where Alterra and New American are licensed to conduct business. Alterra is licensed in Arizona, California, Colorado, Florida, Georgia, Illinois, Nevada, New Jersey, Oregon, Texas and Washington. New American Funding is licensed in every state except Hawaii and New York.

      Use the FREEANDCLEAR LENDER DIRECTORY to find lenders in your state that offer low down payment mortgage programs

    • Your Path Mortgage Qualification Requirements
    • We review the key Your Path Program borrower qualification requirements below. Because the Your Path Program is based on the Home Possible Program, many of the program guidelines are the same.

      Credit Score

      The minimum credit score required to qualify for the Your Path program is 660 for the purchase of single-family residences with a fixed rate mortgage. The minimum credit score required for an adjustable rate mortgage (ARM) or refinancing is 680. The minimum credit score required for a multi-family property is 700.

      Borrower Debt-to-Income Ratio

      The Your Path program is relatively flexible on the debt-to-income ratio applied to determine what size mortgage a borrower can afford. In short, a debt-to-income ratio represents the ratio of how much you spend on monthly debt payments such as your mortgage, car loan and credit card bills to your monthly gross income. The higher the debt-to-income ratio used by the lender, the larger the mortgage you can afford. According to Your Path Mortgage Program guidelines, a lender may use a higher debt-to-income ratio for a borrower with stronger financial, credit and employment profiles. Additionally, lenders can factor in non-borrower household income from a relative or boarder to improve an applicant’s debt-to-income ratio, which may enable you to qualify for a larger mortgage.

      Although the program uses no strict figure, lenders typically use a debt-to-income ratio of 43% - 45%. The debt-to-income ratio limit used by the Your Path Mortgage Program is lower than for standard mortgage programs as well as the HomeReady and FHA mortgage programs which permit a borrower debt-to-income ratio of 50% or higher under certain circumstances. A lower debt-to-income ratio reduces what size mortgage you qualify for with the Your Path program.  For example, if you earn $5,000 per month in gross income and the lender applies a debt-to-income ratio of 43%, you can spend $2,150 on monthly debt payments including your mortgage ($5,000 * 43% = $2,150).

      Borrower Income Limits

      Your Path borrowers may be subject to income limits depending on the location of the property they are financing. Unless the borrower is purchasing a property located in a designated Underserved Area or High Cost Area, a borrower’s annual gross income must be equal to or less than the area median income (AMI). Income limits do not apply to borrowers that purchase a property in an Underserved Area. For properties located in a High Cost Area, the borrower's income can exceed the AMI by a designated percentage, up to 170%. For example, if a High Cost Area has an area median income of $75,000, the borrower income limit for the area could be up to $127,500 (170% of $75,000 = $127,500).

      Areas are designated as Underserved or High Cost according to Freddie Mac and government guidelines. Freddie Mac’s Affordable Income and Property Eligibility Tool enables you to determine the AMI and borrower income limit for an area based on property location.

      Home Buyer Counseling Class

      First-time home buyers are required to take a Freddie Mac-approved counseling class to understand the responsibilities and obligations associated with owning a home.

      First-Time and Repeat Home Buyers

      The Your Path Mortgage program is available to both first-time and repeat home buyers but the borrower that owns and occupies the property cannot own any other homes.

      Borrower Financial Reserves

      The Your Path Program does not require borrowers to hold savings in reserve at mortgage closing for the purchase of single family properties, although FREEandCLEAR recommends that you hold enough savings in reserve to cover three-to-six months of total monthly housing expense (mortgage payment plus property tax, homeowners insurance, private mortgage insurance (PMI) and other applicable housing expenses). So if your monthly housing expense is $1,000, we recommend that you hold at least $3,000 in reserves at the time your mortgage closes.

    • Borrower Costs and Fees
    • Mortgage Rate

      If your income is less than 80% of the area median income (AMI) or if the property you are financing is located in an Underserved Area, you may qualify for a lower mortgage rate. In this case your mortgage rate may be lower than other conventional no and low down payment programs but higher than the interest rate for government-backed programs such as the FHA, VA and USDA mortgage programs. If you do not qualify for the lower mortgage rate, borrowers with lower credit scores and higher loan-to-vale (LTV) ratios pay higher interest rates.

      Private Mortgage Insurance (PMI)

      If your LTV ratio is above 80%, the Your Path Mortgage Program requires that borrowers purchase private mortgage insurance (PMI), which is an ongoing monthly cost in addition to your monthly mortgage payment. In short, PMI protects the lender in the event that the borrower defaults on the mortgage. The amount of PMI the borrower is required to pay depends on the LTV, credit score and other factors. In some cases, the required monthly PMI fee is lower than the monthly mortgage insurance premium for an FHA mortgage. Additionally, the Your Path Program does not require borrowers to pay an up-front PMI fee like they do for an FHA, VA or USDA mortgage and the monthly PMI fee is removed when your LTV ratio falls below 78%.

      Extra Fees

      Aside from a small fee to pay for the home buyer counseling class, if applicable, borrowers are not required to pay additional fees to apply for the program. Borrowers using a closing cost grant may be required to pay a separate fee to the housing agency or commission to apply for that program.

    • Mortgage Type and Amount
    • Mortgage Program

      The program applies to thirty year fixed rate mortgages. Under certain circumstances, borrowers may also be able to use 5/1, 7/1 and 10/1 adjustable rate mortgages (ARMs). Interest only mortgages are not eligible for the Your Path program.

      Loan Limit

      The program only applies to conforming loan amounts ($453,100 or below for a single unit property in most counties) which limits the size of mortgage you can obtain.

      Mortgage Type

      The Your Path Mortgage Program applies to both home purchase mortgages and refinancings, although cash-out refinancings are not permitted.

      Impound Account

      The program requires home buyers to pay property taxes, homeowners insurance and PMI, along with their mortgage payment, into an impound account on a monthly basis. An impound account is a trust account controlled by the lender from which expenses such as taxes and insurance are paid when due. The impound account does not affect the amount of fees the borrower is required to pay for the mortgage.

    • Property Eligibility and Location
    • The Your Path Program applies to owner-occupied, principal residences such as homes, condominiums or co-ops. Multi-family, one-to-four unit properties are allowed as long as the applicant resides in one of the units. The 3% down payment option only applies to single-family residences and applicants looking to buy multi-family properties may be required to make a higher down payment.

      The property must be located in a state in which Alterra Home Loans and New American Funding are licensed to issue mortgages. Alterra is licensed in eleven states and New American Funding is licensed in every state except Hawaii and New York.

    • Rate Details*
      Loan Program:  
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      Points  More Info:
      Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
       
      Total Lender Fees:  
      Loan type:  
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      Credit Rating:  
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      Monthly Housing Payments
      P & I More Info
      Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
      Mortgage Insurance More Info
      Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
      (Estimated)
      Property Tax More Info
      Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
      (Estimated)
      Homeowner Insurance More Info
      Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
      (Estimated)
      Homeowner Association Fee More Info
      Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
      (If Any)
      Total Monthly Housing Payments
      Lender Fees
      Points More Info
      Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
      Origination Fee More Info
      Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
      Credit Report Fee More Info
      Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
      Tax Service Fee More Info
      Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
      Processing Fee More Info
      Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
      Underwriting Fee More Info
      Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
      Wire Transfer Fee More Info
      Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
      (If Any)
      FHA Upfront Premium More Info
      FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
      (If any)
      VA funding Fee (If any)
      Flood Fee
      Other Fees More Info

      Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

      The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

      Total Lender Fees
      *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
      Compare Mortgage Rates as of September 19, 2018
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      Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
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