Easing Your Way Into Homeownership: A Guide To Low Down Payment Mortgage
Programs
by W. Troy Swezey
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
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