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
