Connecticut home buyers can choose from state and local government programs when looking for a mortgage. Local government home loans include CHFA, HERO, and UR Home mortgages.
Content: Nationally, government loans, such as FHA, VA, and USDA mortgages, are an option for borrowers who want to own a home. While qualifications vary, such programs provide borrowers with assets such as lower down payments and less stringent requirements, including lower credit. The U.S. federal government insures and issues such programs.
State governments additionally provide loans, and in Connecticut, the Connecticut Housing Finance Authority (CHFA) is responsible for such programs.
CHFA loans, an option for first-time homebuyers and those who have purchased real estate in certain areas, are characterized by below-market interest rates, and lower down payments, especially compared to conventional mortgages, are an added benefit. Nevertheless, those applying for CHFA loans should be aware of income limits, which vary by area, and selling prices.
While this Connecticut mortgage expands homeownership options, borrowers can only use it to purchase certain types of real estate, which must be used year-round: single-family homes, townhouses, planned unit developments, new FHA-compliant homes energy efficiency standards, FHA-approved condominiums, two- to four-family homes, and FHA-approved mobile homes. Property may not be used for recreation, investment, vacation, rental or commercial purposes.
Connecticut borrowers interested in this mortgage should prepare for federal mortgage insurance. Specifically, a CHFA loan can be secured through the Federal Housing Administration, Veterans Administration, or USDA Rural Development. However, if a borrower decides to put down a 15 percent down payment or buys a home in a federally-targeted area that exceeds FHA loan limits, he or she has the option of private mortgage insurance instead. The insurance requirement is waived if the borrower makes a down payment of 20 percent or more on a newly built home in a federally targeted area.
Borrowers who cannot cover the upfront costs have the option of the Downpayment Assistance Program (DAP).
Coming from CHFA are the HERO and UR Home programs, both focused on neighborhood stabilization in Connecticut. HERO, or the Homeowner’s Equity Recovery Opportunity Loan Program, is designed for new and past homebuyers and, like CHFA loans, offers a competitive interest rate below the market. Income and price have no limits unless DAP is used.
A statewide option, HERO can go to a similar assortment of properties as long as they are foreclosed, bank owned or abandoned and the borrower plans to live there. In addition, cooperatives, unfinished houses, and properties that have not been completely demolished are not covered by HERO’s requirements.
Because HERO-qualifying properties may need repairs, this mortgage can be combined with a 203(k) loan. The two mortgages must not exceed the applicable loan-to-value ratio and HUD maximum mortgage limits.
UR Home, or the Urban Rehabilitation Homeownership Program, has a similar purpose to HERO, but borrowers can only purchase properties in and be employees of businesses in Bridgeport, New Haven, Hartford, Waterbury, New London, and parts of Windham. This program combines a standard purchase mortgage for a Connecticut property at a low interest rate with an interest-free home improvement loan, which is available on a first-come, first-serve basis and allocates $20,000 for repairs to a single-family home and $25,000 for a multi-family house. Like HERO, UR Home is specific to a home where an owner intends to live and has no income limits.