Back in the early 80’s, Wisconsin recognized the opportunity to help its citizens with home ownership opportunities by implementing specific unique mortgage programs. From this desire the Wisconsin Housing and Economic Development Authority (aka WHEDA) was created. Since its inception over 1,000 grants have been awarded, enabling people to find their own place to call home.
What is a WHEDA Loan?
WHEDA is the acronym that stands for Wisconsin Housing Economic Development Authority. This group was founded by the state of Wisconsin in 1972. The group works with lenders, buyers and developers to offer mortgage loans aimed at borrowers in moderate and low-income areas.
The mortgage loans offered by WHEDA have a fixed rate for the term of the loan and do not charge private mortgage insurance to the borrowers.
WHEDA requires a 3% down payment from borrowers. Many assistance programs across Wisconsin aid borrowers with getting the funds for the down payment. Down payment funds can also be gifted from a relative.
The WHEDA loan guidelines also allow more flexibility in approving borrowers with less than stellar credit. The goal of the group is to promote homeownership to those that may not qualify for conventional financing or for those that may not have a significant down payment.
Common Denominator – Home Education
Although WHEDA offers various programs, they all share a common requirement; home education. Buying a home is a very serious commitment not only of a person’s money but also of their time for the foreseeable future. WHEDA wants the citizens of Wisconsin to have a firm grasp of how a mortgage works and what is expected of the borrower throughout the home buying process as well as home ownership. For this reason, it is mandatory that all people eligible for the WHEDA loan complete a home buyer course before the loan is closed.
WHEDA Welcomes First Time Home Buyers
People who have never owned a home are highly encouraged to apply for the WHEDA loan. Since the goal of the program is to enable home ownership, the main focus is to assist people in purchasing their first property. The credit requirements are almost identical to FHA and Fannie Mae loans. The WHEDA FHA Advantage program follows guidelines that are very similar to the regular FHA loan. Similarly, the WHEDA Advantage home loan follows guidelines that are very similar to Fannie Mae guidelines.
WHEDA Income Limits
All borrowers must fall below the income limits set by WHEDA. Since the aim of the program is to help citizens with average income levels, certain guidelines were instituted to ensure the right people were being assisted.
The income levels are based on 3 factors:
- The location of the property. Each city and county within Wisconsin have different limits. The income maximum ranges from $68,600 to $117,460.
- The number of people living in the home. A 1-2 person household will have a slightly lower income level than a household with 3 or more people living in it.
- The type of loan. The First Time Home Buyer loan as well as the VALOR and MCC loans all have slightly lower income levels compared to the WHEDA FHA and WHEDA Conventional loan programs.
There is one other exception to the previous factors. Targeted areas will allow slightly higher household incomes. WHEDA maintains a list of specific areas that they would like to see the levels of home ownership increase. These areas allow higher incomes per home in order to attract more potential buyers.
General WHEDA Requirements
For the various WHEDA loan programs the credit requirements may vary slightly. However, in general, all applicants will need to meet the following criteria
- Credit score of at least 640
- Steady, documented source of income
- Sufficient income to cover their existing bills plus the proposed home loan payment
- Borrowers must intend to live in the home as their main residence
- Borrowers must buy a stick built home. Mobile homes and condos are generally not accepted
Getting Help with the Closing Costs and Down Payment
WHEDA has also made it possible for people to qualify for a home purchase now rather than wait a few years in order to save money for the down payment and closing costs.
The Easy Close Advantage is available to people that qualify for the WHEDA Advantage program. The Easy Close allows borrowers to get a 2nd loan that will help with the closing costs as well as the necessary down payment.
The Easy Close loan is also a fixed rate loan just like the WHEDA mortgages. However, this 2nd loan is only for 10 years. Borrowers that qualify for the WHEDA Advantage loan will automatically apply for the Easy Close loan. Similar guidelines for credit and income will apply to the 2nd mortgage just like the 1st mortgage.
The Easy Close loan is only designed to help with down payment funds and closing costs. It is not intended for making repairs or improvements to the intended property.
WHEDA Helps You Save Money on Your Federal Taxes
Paying federal income taxes is something that all working people face. WHEDA has introduced a tax savings benefit to help homeowners save more of their hard earned money.
If you are approved for a WHEDA loan, then you may also be allowed to use the WHEDA tax advantage. The tax credit allows you get a credit on your annual tax return. A tax credit is better than a deduction. A tax credit will reduce your tax liability dollar for dollar. For example, if you currently owe $1,200 on your taxes and get a tax credit of $300 then you now owe $900.
The tax credit is limited based on the area where your property is located. If you buy a home in a targeted area, then you may get 40% of the annual paid mortgage interest as a credit. If you do not buy a home in a targeted area the tax credit is limited to 25% of the interest paid.
The most that any household can claim as a tax credit is $2,000 per home for any one tax year. Borrowers are allowed to claim the credit a maximum of 30 years.
WHEDA is Available to Veterans
Although the VA mortgage is the more common choice for eligible veterans, WHEDA also has a program specifically for veterans too. The Veterans Affordable Loan Opportunity Rate or VALOR will allow veterans with an honorable discharge to apply for a mortgage. The credit and income guidelines used for this loan are the same as the WHEDA Conventional Advantage loan.
Thankfully, WHEDA does not require a qualifying veteran to be a first time home buyer. People that have previously owned a home via VA, FHA, Conventional or any other type of loan are welcome to apply for the WHEDA loan.
Buying a Duplex is Also Possible
Some people have used the purchase of a duplex as a way of supplementing their income or buying a property that would accommodate two families. Borrowers that are approved for the WHEDA Advantage loan can consider a duplex as their primary property. However, the borrower will need to attend counseling for landlords in addition to the home buyer education in order to get approved for the loan.
For families that may be assisting with the living arrangements of elderly relatives, a duplex can be a great way to have their loved ones close by but also have a bit of privacy.
Summing Up The WHEDA Loan Program
The WHEDA loan program is Wisconsin’s way of giving back to the community and strengthening its people. By offering a solid model for mortgage lending, people that formally thought they could not ever afford a home have learned that home ownership is definitely within their future.