What Are Bond Loans?
If you’re interested in buying a home, learning what a bond loan is will help you explore your options. If it seems like a good fit, discovering how to get one of these loans might help you reach your housing goals.
Bond Loan 101
What is a bond loan? Basically, it’s a type of home loan that is partially subsidized by the sale of mortgage revenue bonds. These bonds are typically issued by cities, states, or other entities that want to help low- and middle-income families become homeowners. SmartAsset explains how it works:
- A state or local government or some other organization decides to sell mortgage revenue bonds, which are bonds backed by a group of mortgages, to raise money for a program to make homeownership more affordable.
- Investors in mortgage revenue bonds are rewarded every time that the homeowners linked to these mortgages make the interest payments on their home loans. It’s tax-free and seems safe, which has an appeal for certain investors.
- The government group takes the money raised to a lender with instructions to use it for bond loan program for people who meet certain requirements. This may include income levels. The government backing allows lenders to take chances and offer loans to people that might not have been able to get approved for mortgages without special programs.
Who Qualifies for a Bond Loan?
Will you qualify for a bond loan? As Financial Web indicates, that’s hard to say because the rules vary from one program to the next. However, there are certain things that tend to be true. Generally speaking, a bond loan is a 30-year fixed-rate mortgage. The loan must be used to purchase a primary residence. Finally, the borrower’s income can be no more than 115 percent of the county’s median family income.
How to Get a Bond Loan
Could a bond loan be the perfect tool for your homeownership journey? These loans don’t get as much attention as conventional loans or other government-backed options like FHA loans or VA loans. If you want to get a bond loan, Zacks offers some advice:
- Contact your state housing department. Reach out to your state’s housing department for information about any bond loan programs. The laws governing these programs vary by state, so it’s important to contact your state’s department.
- Review eligibility requirements. Ask about the eligibility requirements for your state. Be aware that some programs may have additional requirements.
- Contact lenders. Your state housing department should be able to provide you with a list of participating lenders. Loan officers can provide you with detailed guidance about the programs, how they work, and what you need to apply.
- Complete applications. Complete the application, and supply all the necessary documentation. Then, wait for the lender’s response.
Should you celebrate your bond loan with a martini that is shaken not stirred? That’s entirely up to you. A bond loan may not be as sleekly glamorous as an evening out in a spy thriller, but if you qualify for one, they can be an excellent way to embark on the adventure that is homeownership. Are you interested in learning more about bond loans? Would you like to explore other financing options like conventional loans, FHA loans, VA loans, or USDA loans? Reach out to PrimeLending Dallas. Our crew of loan experts would be delighted to help you find the loan product that you need to reach your housing goals. Contact us today to get started.