Many first time home buyers falsely believe that there are FHA First Time Home Buyer programs designed for them with low, low rates. The fact of the matter is that the FHA rate offered to a homebuyer is determined by the Lender (Loan Officer) with whom they are dealing. Further, if a borrower has good to excellent credit, he/she may save thousands over the course of a 30 year loan by opting for a Conventional loan program.
97% FHA loans may be most attractive to borrowers with lower credit scores or no established credit histories. FHA loans are government insured mortgage loans- and borrowers will pay extra money each month (for the duration of the loan unless you take steps proactive steps to cancel it) for that mortgage insurance. Bankruptcies must be seasoned for a minimum of 2 years (some cases 3 years) and all income must be documented. FHA also imposes a maximum loan amount per county and the maximum loan amount in the state of California for single family residences is $239,250.
There is a 100% Financing alternative! Lenders have created a variety of attractive, flexible loan packages to encourage first time home buyers.
Savvy home buyers with good credit can avoid the monthly mortgage insurance with 100% conventional financing! No mortgage insurance can mean a potential savings every month, and perhaps tens of thousands of dollars over the life span of the loan!
Additionally, conventional loans do not require the following:
- Seller contributions to non-recurring closing costs
- Special FHA appraisals
- 45 day escrows
- Pre-payment of mortgage insurance
- 3% down payment
Conventional loans are also available to borrowers with recent bankruptcies, slow pays, stated income, and jumbo loan amounts.
All first time home buyers should get Pre-approved not Pre-qualified!
Many first time home buyers shop for a home or condo and they get excited about a property that they would like to purchase but discover later that they may not be qualified. A first time home buyer can avoid being disappointed by getting pre-approved not pre-qualified. With pre-qualification, a lender tells you "how much you can qualify for" based upon information you provide but they don't commit to making you a loan. On the other hand, a pre-approval involves making an application, submitting documentation, and obtaining a formal pre-approval letter which is a commitment for a loan. The letter will give you greater negotiating power and let sellers know that you are a no problem buyer.
How to buy a home with no money down!
Many first time home buyer programs offer 0-3% down payment options with approved credit. Some zero down first homebuyer programs allow you to roll in closing costs so that you can go to the closing table without writing a check! Most 3% down programs allow the down payment to be in the form of a 100% gift. Many people believe that you need very low income to qualify for these programs. Not true! For example, there are programs which target areas of Chicago such as Lincoln Park and you can have unlimited income to qualify. Don't put off buying due to a lack of funds since there are many flexible loan programs to meet your financial situation.
How to buy a Home with damaged credit!
You should not pass up the opportunity to own because you feel that your credit is not good enough to qualify for a loan. Today, most lenders understand that there are circumstances in people's lives such as unemployment, medical, etc., which lead to slow pay to creditors and they offer programs for the creditly challenged. You should run a credit report with 3 scores and consult a mortgage professional before closing the door on home ownership. He will pre-qualify you and determine what program will best suit your needs based on your credit report with 3 scores. You should let the loan officer know the reasons for the credit delinquencies. Also, there are programs which allow no credit history. Click here if you had Bankrupcy. If you do not qualify for a loan now, you should work on improving your credit over the next 6 months to 1 year and then decide to buy.
