Many recent grads are putting off buying their first home because they think that they can’t get approved for a mortgage. Loans requiring 20% down are a thing of the past. If you are a recent grad with a good income and some savings for a down payment or closing costs, you can achieve the American dream. There are numerous loan options that help first time home buyers with loan down payment requirements. Bankrate.com defines some of the most common of these loan types:
In an FHA loan, the Federal Housing Administration insures the mortgage. The FHA is an agency within the U.S. Department of Housing and Urban Development (HUD).
The FHA’s backing offers lenders a layer of protection, meaning that your lender won’t experience a loss if you default on the mortgage.
FHA loans typically come with competitive interest rates, smaller down payments and lower closing costs than conventional loans.
If you have a credit score of 580 or higher, you could be eligible for a mortgage with a down payment as low as 3.5 percent of the purchase price. If your credit score is lower than 580, you still might qualify for an FHA mortgage, but the down payment would be at least 10 percent of the purchase amount.
FHA Section 203(k)
This type of loan, backed by the FHA, takes into consideration the value of the residence after improvements have been made. It then lets you borrow the funds you’ll need to carry out the project and includes them in your main mortgage.
The down payment for a 203(k) loan can be as low as 3 percent.
While not well known, the U.S. Department of Agriculture (USDA) has a homebuyer assistance program.
While the program focuses on homes in certain rural areas, you don’t need to buy or run a farm to be eligible.
The USDA guarantees the home loan. There may be no down payment required, and the loan payments are fixed.
Applicants with a credit score of 640 or higher typically get streamlined processing. With a credit score below 640, you still can qualify for a USDA loan, but the lender will ask for extra documentation about your payment history.
Keep in mind that there are income limitations, which can vary by region.
The U.S. Department of Veterans Affairs (VA) helps active-duty military members, veterans and surviving spouses buy homes.
The VA guarantees part of the loan, making it possible for lenders to offer some special features. VA loans come with competitive interest rates and require no down payment. You aren’t required to pay for private mortgage insurance (PMI), and a minimum credit score isn’t needed for eligibility.
If it becomes difficult to make payments on the mortgage, the VA can negotiate with the lender on your behalf.
Fannie Mae or Freddie Mac
Fannie Mae and Freddie Mac are government-sponsored entities. They work with local lenders to offer mortgage options that benefit low- and moderate-income families.
With the backing of Fannie Mae and Freddie Mac, lenders can offer competitive interest rates and accept down payments as low as 3 percent of the purchase price.
Fannie Mae also provides homeownership education for first-time homebuyers through its “HomePath Ready Buyer” program.
Keep in mind when selecting one of these loans that there are more costs to owning a home than just principle and interest payments. Your monthly payment may also include tax escrows, home owner’s insurance payments and also HOA/CDD fees applicable to your community. You want to factor these items into your monthly payment to make sure you are not taking on a higher monthly payment than you can afford. It’s always advisable to get pre-approved for a loan first and then start looking for a home that works within your monthly payment budget.
With these affordable down payment options listed above, you don’t have to drain your savings to afford your new home. You always want to keep some slush funds in your bank account for emergencies or to decorate your new home. Also, keep in mind that you never want to apply for new credit cards or other loans to fix up your new home or furnish it until after you close on your loan. This could lower your credit score and cause your mortgage to get denied.
Maronda Homes works with preferred lenders that offer many of these first-time buyer loan options. We would be more than happy to help you get pre-approved for a mortgage. Because we offer numerous financing programs we request meeting with us in person to look at your financial information and find a program that works for you. Credit scores and financial qualifications do vary depending on the loan program. If you’d like to schedule a time with me to visit one of our model sales centers, we can help you get approved right on the spot. When working with one of our lenders, we can pay towards your closing costs as an added incentive. If our preferred lenders can’t get you approved for a loan right now, we can help give you some suggestions on what you can do to improve your credit score to get approved. Is there a good day and time for me to schedule you to come in and discuss applying for a mortgage with us in person? Schedule a time with us on our website: www.marondahomes.com