This is a horizontal, color photograph of a home in a suburban neighborhood. The late afternoon, setting sun casts a lens flare. An unpaved road leads past the long shadows and their trees to the house's exterior.

The U.S. Department of Agriculture's Rural Housing Service offers a program to help homebuyers looking to purchase in parts of the country designated as rural. (Getty Images)

Buying a home is a deeply personal decision, and most people prefer the familiar when it comes to decisions about money and getting a mortgage. According to national consumer surveys, as many as two-thirds of homebuyers check in with friends and family first when starting the homebuying process. But as comfortable as it is to rely on the advice of friends and family, they are not likely to know about the full array of mortgage products and lenders in the market. That gap in knowledge could be the difference between being approved for a mortgage or not, and spending too much in the process.

About 90 percent of mortgage loans are made by banks or large online lenders that most people know, but the remaining mortgage providers can be a better fit, depending on the borrower’s circumstances. These mortgage sources want your business and have products and programs that work for many borrowers who are denied by the big players, especially homebuyers who struggle to save for a down payment or who are recovering from credit difficulties.

These little-known mortgage sources – such as state housing finance agencies, specialty federal programs and credit unions – can be found throughout the U.S. It just takes the right partner, usually a housing counselor, to help you locate them and determine which mortgage product will be best and help put a new set of house keys into your hand.

[See: 8 Home-Selling Buzzwords That Annoy Consumers.]

Housing Finance Agencies

Each state (plus the District of Columbia and Puerto Rico) has a housing finance agency that helps qualified consumers obtain a mortgage to help them purchase a home. In 2015, more than 102,000 people became homeowners with the help of HFAs, borrowing nearly $16 billion.

HFAs exist to help low- and moderate-income homebuyers, and their income, debt and credit guidelines are different for each program. That doesn’t mean that if you have bad credit that you’d get a mortgage from an HFA affiliated program. It means that your credit doesn’t have to be perfect or near perfect.

For example: The median credit score of a borrower helped by the Minnesota Homeownership Center in 2015 was 638, according to its annual Homebuyer Services Report, about 110 points lower than the median score of borrowers who received mortgages from the mortgage market overall.

Importantly, HFA programs with their flexible down payment requirements are perfect for homebuyers who struggle to come up with the down payment to begin the home purchase process. Depending on the program, borrowers need to have a 3 percent down payment, but those funds could come either from their own savings, a qualified gift from family or from one of the hundreds of down payment assistance programs available, depending on where you live. Most housing counselors have access to the details of these programs and can help a buyer find the one that works best.

Finally, when it comes to mortgage programs supported by HFAs, middle-income buyers are welcome. In New Jersey, a single homebuyer in a county with high market values with an income as much as $103,000 may qualify. The National Council of State Housing Agencies offers a list of HFAs by state on its website.

[See: The Best Apps for House Hunting.]

USDA mortgages

When most people think of the U.S. Department of Agriculture, they think farming. But the Rural Housing Service, part of the USDA, has a mission to help people who live in rural parts of the U.S. obtain quality and affordable mortgages.

At $18 billion in home lending support in 2015, the service’s Rural Home Loans program is larger than the HFA and helps people buy homes in locations that are designated as rural. Frequently, what counts as rural is surprising and provides an opportunity for a borrower to get a great mortgage deal.

Like with HFA mortgage programs, RHS operates in every state. Prospective homebuyers qualify for mortgage products based on income and the rural area where the home is located. Income eligibility is highest in higher-income rural counties, and can climb above $110,000 in some markets.

Importantly, many of these rural counties are just outside of high-employment metro areas. While the cost in money and commute time into these metro areas need to be evaluated (another reason to work with a housing counselor), the choice to pursue an RHS mortgage could be a wise and financially feasible decision.

Down payment requirements for RHS supported mortgages are very low – there is no down payment for qualifying borrowers. Moreover, when a down payment is required, lenders who participate in these programs are familiar with how to process down payment assistance programs in order to make getting the mortgage and buying the home as seamless as possible.

You can find out if you live in an eligible Rural Housing Services area, get information on the program’s income guidelines and see a list of lenders who make RHS loans on the USDA’s website.

[See: The Best Places to Live in the U.S. in 2017.]

Credit Unions

Credit union mortgage lenders are among the fastest growing in the market today. In 2015, credit unions accounted for approximately 6 percent of the total home loan market. Like HFA and RHS mortgage programs, credit unions offer mortgages across the country, and there’s probably one nearby that you could join.

Although credit unions only provide mortgages to their members, it is becoming easier to join some of the largest and most sophisticated credit unions that offer the widest range of products. For example, a consumer who is not a current or past member of the military (and thus automatically eligible) could join Pentagon Federal Credit Union (or PenFed) after making a $17 tax deductible donation to become a member of the National Military Family Association, among other organizations. Membership provides qualifying borrowers immediate access to PenFed mortgages with down payment options of 3 percent or less.

Some credit unions also offer low- or zero-down payment mortgage loans that don’t require private mortgage insurance. Private mortgage insurance is usually required for a borrower who has less than a 20 percent down payment. Homebuyers who qualify for this mortgage program can save money every month, and perhaps thousands of dollars over the life of the loan.

Savings is the point of seeking out mortgage programs from traditional and nontraditional sources – by looking at untapped sources of mortgage money, you just might find the loan that brings you home with a bit more money in your pocket.

Tags: real estate, housing, housing market, new home sales, existing home sales, pending home sales, mortgages, credit unions, USDA, savings


Marietta Rodriguez , vice president, National Homeownership Programs, leads NeighborWorks America's efforts to increase homeownership among low- and middle-income households. Under her leadership, over the last four years the organization and its affiliated network of nonprofits around the United States have helped more than 75,000 families become homeowners. Rodriguez has worked to promote homeownership at NeighborWorks America for more than 15 years.

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