WHEDA Pros and Cons
Residents of Wisconsin have a way of buying a home that is unique to the state. The Wisconsin Housing and Economic Development Authority (WHEDA) offers mortgage loans to a qualified group of individuals. Listed below are some of the pros and cons of the WHEDA loan offered by the state of Wisconsin.
Pros of the WHEDA Loan
Here are the top advantages of using a WHEDA loan to buy a home.
- Lower credit scores – The guidelines of WHEDA will allow people with lower credit scores to apply for the loan. People that may have been turned down for a conventional loan from either Fannie Mae or Freddie Mac will usually find that their scores are high enough to qualify for WHEDA.
- Low down payment – similar to the FHA loan that has been so popular for many years, WHEDA only requires the buyer to pay 3% of the home’s selling price as a down payment. Compared to a 5% or 10% down payment, this one aspect of the loan can save the buyer thousands of dollars at the onset of the mortgage.
- Possible to borrow money for the down payment – This is one of the most unique features of the WHEDA mortgages. All other loans that require a down payment insist that the borrower uses their own funds. WHEDA allows the home buyer to take out a new loan to cover the amount for the down payment.
- Tax credit (MCC) – a large part of the interest paid on the WHEDA mortgage loan can be used as a tax credit. The tax credit will reduce the homeowner’s annual tax bill when it comes time to file your tax return each April.
- Ideal for buyers with lower income – the main point of the WHEDA mortgage is to provide a way for people with lower income to qualify for a home loan.
The features of the WHEDA loan make it attractive for people with steady employment to find a true path to homeownership.
Cons of the WHEDA Loan
Here are some things to keep in mind if you are contemplating using a WHEDA home loan.
- Low income only – the rules of WHEDA have limits on the annual income allowed by borrowers, based on the number of people that will live in the home with the borrower. Basically, people with higher than average income will not be allowed to use the WHEDA mortgage product.
- No investment properties – WHEDA does not offer loans for investment properties or second homes. The loans can only be used by people who intend to live in the home as their main residence.
- Only for Wisconsin properties – this may seem a bit redundant, but as the name suggests, the WHEDA loan is only offered to people that will be buying a home within the state boundaries of Wisconsin. The program is not used to purchase a home in any other state.
- Lower maximum loan amounts – since the loan is intended for buyers with lower incomes, it is important to prevent people from getting a mortgage loan that is too high. For this reason, WHEDA has maximum loan limits for first time home buyers. These loan limits are usually smaller than maximum limits set forth by other types of mortgages such as FHA and conventional.
As mentioned earlier, the WHEDA home loan program is geared towards a specific clientele. People that don’t meet the characteristics of that clientele usually are not a good prospect for WHEDA.
Summing Up The Pros and Cons of the WHEDA Loan
Many people across Wisconsin dream of owning a home and carving out their place in the world. But the dream is often derailed by the idea of spending several years saving up enough to have thousands of dollars set aside for a down payment. Instead, these people faithfully pay rent on a place there will never be their own. Thanks to WHEDA, these same individuals now have an opportunity to find a place and call it their own.
About the author: This article was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generate new leads from his website.
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