Easing Your Way Into Homeownership

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

Easing Your Way Into Homeownership: A Guide To Low Down Payment Mortgage Programs

There’s no question about it: Buying a first home is a big financial commitment. In most cases, a home is the largest single purchase an individual or family will make in a lifetime. However, because of the tax advantages afforded to homeowners, buying a home also can be one of the best financial decisions you’ll ever make.

Problem is, many would-be homeowners remain renters simply because they mistakenly believe mortgage lenders require that buyers come up with 20 percent of the purchase price as a down payment. While it’s true lenders feel it’s less risky to work with buyers who are able to bring a substantial down payment to the table, the standard 20 percent requirement is fast becoming a relic of the past. In recent years, lenders have become more flexible in working with first-time homebuyers by creating a variety of special programs that require only a small down payment. These programs, combined with the most favorable interest rates in two decades, have encouraged growing numbers of renters to consider the tremendous benefits of home ownership.

While the list of programs offered by individual lenders is too extensive to mention in detail, here are some common programs you are likely to come across as you work with your real estate agent to purchase your first home:

Federal Housing Administration (FHA): FHS mortgages allow homebuyers to purchase a home with as little as a 5 percent down payment, and to finance all non-recurring closing costs. The current maximum loan amount in most urban markets is $151,725. In addition, borrowers are allowed to use up to 41 percent of their gross income toward paying mortgage debt – well above the ratio allowed under most private programs.

Department of Veterans Affairs (VA): VA mortgages allow veteran or active service personnel purchase home with no down payment, up to the current maximum price of $184.000. However, there is no purchase price limitation for buyers able to make a down payment. Like the FHA program, VA borrowers can put up to 41 percent of gross income toward their mortgage debt.

Mortgage Revenue Bonds and Mortgage Credit Certificates: Mortgages funded with these instruments typically require a minimum of 5 percent down and have interest rates that are 1.5 to 2 percentage points below conventional 30-year fixed rates. These types of loans, offered by state and local housing agencies, are available only to first-time homebuyers. There generally are income and purchase price caps that vary, depending on where you plan to buy.

Private Mortgage Insurance: Most major lenders offer privately insured mortgages, which generally require a 10 percent down payment (although some lenders offer loans with a 5 percent down payment to buyers with exceptional credit). These loans typically are not limited by maximum loan amount or purchase price limitation.

Community Homebuyer Program: Through their networks of mortgage lenders, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) offer Community Homebuyer Program loans. These programs require a 5 percent down payment, 3 percent of which may be a gift. To further help buyers qualify, applicants may use 38 percent of their gross income. Currently, the maximum loan amount available through these programs is $203,150.

Clearly, there are a lot of options for first-time homebuyers. While lenders will be more than happy to share information about their own programs, you can save yourself a good deal of time by first selecting a professional real estate agent who is experienced in working with first-time buyers in the areas where you plan to buy.

An agent who focuses on first-time buyers will know from experience which lenders in your area offer a low down payment program that will meet your unique needs.

Today, taking the first step toward owning your own home is easier than before. Your real estate agent is your best resource for finding innovative ways to help you come up with a down payment and qualify for financing. There’s certainly no need to wait until you’ve saved a 20 percent down payment!

About The Author

W. Troy Swezey is the author of “EASING YOUR WAY INTO HOMEOWNERSHIP: A GUIDE TO LOW DOWN PAYMENT MORTGAGE PROGRAMS." As a Realtor at Century 21 Paul & Associates, he has helped many individuals with their real estate needs. Visit his web site to download his free e-book, “REAL ESTATE SECRETS EXPOSED.” http://www.TroyIsMyRealtor.com or mail to: TroyC21@usa.net

BECCA9892003 · Joined: 20 Jan 2005 Posts: 400 Location: Altoona, PA

Well most of the statement is true. I would not recommend going to your real estate agent for advice...most of them do not fully understand the loan programs available and what is needed to qualify for them and in alot of instances becasue of their lack of knowlegde on the subject sometimes get their buyers hopes up when they cant get financing. I would recommend working with a knowledgable broker who can offer many different types of programs and with this primarily being a sub-prime market, a broker would know what is the newest programs available for these types of people.That is why we host seminars for first time home buyers and for credit repair to work as a team with realtors and lenders to help guide the first time home buyer through the process and give them the product that will best fit their needs and budget.

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

Yes, I need help in this area.
For example, I get confused about the most basic questions like:
1) What price of house can I get for $1200/month?
2) When I say $1200/month, I mean everything that I am not paying now for my apartment.

I probably don't even deserve to be admin of this forum, but give me timeand I will learn. In the meantime, please help post good topics in the Loan Talk areas.

BECCA9892003 · Joined: 20 Jan 2005 Posts: 400 Location: Altoona, PA

example......

100k house 15 year term at 6 %...is 843. a month..if you want to include your taxes and insurance..will be close to your 1200 a month..if you brough this same scenero to a 30 year...it would only be 599.....then you have an easier payment and can make extra when your budget allows...this one one of the few thing in life that everyones case is different thats why it is so important to find a broker who you can work with through the process to obtian what would be in the clients best interests and needs...

chow · Posted: Fri Jan 28, 2005 12:25 pm Post subject:

Okay, I'll give you a very easy formula to follow.

figure 10% of the home price for mortgage, taxes and insurance. 15% if people actually want to build a slush fund for repairs, additional landscaping, affording a garden hose and some flowers in spring. Your comment about:

"Yes, I need help in this area.
For example, I get confused about the most basic questions like:
1) What price of house can I get for $1200/month?
2) When I say $1200/month, I mean everything that I am not paying now for my apartment. "

Leads me to believe that you are a "grasshopper."
that's okay, we all start somewhere, and they day we quit learning is the day we die. having said that- There is this really easy to read book from a guy I met on the grapevine a few years back. His name is George McReynolds. He wrote a small book that is the most common sense approach for money and real estate that I have ever read. His phone number is 215-855-2120.

I suggest you call him and find out if he has any more books left. I would advise you buy anyone in high school this book before they enter college or the job market. I would aslo suggest you buy them for every first time homebuyer.

Tell him chow said HI! and to wander over here after tax season.

ReTrEaD · Joined: 01 Apr 2005 Posts: 1

Retread says, you also have to be very wary for all the unexperienced "green" loan reps and scam loan companies out there. My wife is a Realtor and I am a Developer, we both deal with loan companies and reps daily and I cant even count the times a rookie (un-knowledgable loan rep has totally ruined a perfect deal !!! Not to mention the problems I have had with them myself in the Construction/Development field, as far as getting buyers hopes up we always tell it like it is and tell the prospective client that we can get them pre-approved or to get a pre-approval letter before they even begin to look at homes, then they know exactly how much house they can buy and will never be misrepresented in any way.... Just another side of the story from my experience... c ya 8) BECCA9892003 wrote: Well most of the statement is true. I would not recommend going to your real estate agent for advice...most of them do not fully understand the loan programs available and what is needed to qualify for them and in alot of instances becasue of their lack of knowlegde on the subject sometimes get their buyers hopes up when they cant get financing. I would recommend working with a knowledgable broker who can offer many different types of programs and with this primarily being a sub-prime market, a broker would know what is the newest programs available for these types of people.That is why we host seminars for first time home buyers and for credit repair to work as a team with realtors and lenders to help guide the first time home buyer through the process and give them the product that will best fit their needs and budget. 8)

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

Yes, Retread...great point!

This is exactly what I am doing now. I see all these houses that I want, but it means nothing until I know how much I can afford. Now what remains is to make sure the loan products I am being offered are the best possible, and this is not an easy question (for me anyway). :wink:

The Big Easy · Joined: 20 Jan 2005 Posts: 30

David, Just a quick note on mortgage payments, a rule of thumb:
If you will figure that 1% of the mortgage amount will be the payment you will be close. For instance if you were applying for a $120,000 mortgage your "total" payment would be approximately $1200. This includes principal, interest, taxes, and H/O insurance. Currently with rates as low as they are your payment would be closer to $1100 but when rates were at 18% they were closer to $1300. However, the old 1% rule is a great rule of thumb to tide you through.