How To Get The Home You Always
Wanted Without The Money You
Always Thought You Needed
Most
people who rent can actually afford to buy their own homes. So what’s
stopping them?
A lot of tenants believe that owning a home requires a
big down payment, which is difficult to save and still pay all their
regular monthly bills. Others are convinced they wouldn’t qualify for a
mortgage, and that the payment would be too much anyway. In addition,
just about everyone is overwhelmed by the legal and financial red tape
surrounding the purchase of a home. It seems a whole lot easier to just
keep paying rent!
Here are a
few facts this report will teach you that could change your mind:
FACT:
Most people actually qualify for a 3% down mortgage but don’t realize
it. Some people can actually qualify for a ZERO down payment mortgage! FACT:
There are special government programs that help first-time homebuyers
come up with a down payment. FACT:
The average mortgage payment costs about the same as the average rent
payment. For example, if you are paying $650 per month in rent, you
could be making mortgage payments on your own $77,500 home. That would
probably buy you a lot more space (and privacy!), than you’ve got right
now! FACT:
77% of renters surveyed said the biggest reason they won’t even check
into the possibility of owning their own home is because they are afraid
they will feel obligated to buy, or are going to be hounded by
salespeople.
CLOSING COSTS:
These are costs which are not controlled by the lender, and are required
for anyone purchasing a home regardless of loan amount or lender. These
include expenses such as attorney fees, title insurance, survey,
recording fees, appraisal, and termite inspection. All of these services
are provided by independent professionals who are not affiliated with
your lender. You can usually figure on your closing costs being
approximately one to one & a half percent of your loan amount.
CONVENTIONAL LOAN:
A loan that may or may not require Private Mortgage Insurance. (Any loan
amount with 20% or more down payment will not require PMI. Any loan
amount with zero or 3% - 19% down payment will require PMI.) This type
of loan is subject to the qualifying guidelines set forth by FNMA
(Fannie Mae) or FHLMC (Freddy Mac). CREDIT
HISTORY: This
is a “snap-shot” of your past and present debt, current available
credit, and a rating of your debt repayment history. This is very
important to a lender so that they can know if you are a good credit
risk. DOWN
PAYMENT: The
difference between the loan amount and the sales price of the home you
are purchasing. This is measured in a percentage; for example, a 3% down
payment on a $70,000 home would be $2100. FHA
LOAN: A loan
that is insured by the Federal Housing Authority. This type of loan is
geared toward providing moderate to low income families mortgages, and
is subject to the qualifying guidelines set forth by the Federal Housing
Authority.
INTEREST RATE:
The percentage of interest charged on the amount of money borrowed. This
rate will vary slightly from lender to lender, and will vary according
to the type of mortgage chosen (30 year fixed, 3 year adjustable, etc.).
Now is an excellent time for mortgage interest rates, as 1996 has
ushered in consistently dropping rates that are the lowest in over 30
years!
MORTGAGE BROKER:
A mortgage broker is different
from a single lender/bank, in that they represent many different lenders
in much the same way a travel agent represents many different airlines.
Most people don’t call a single airline and expect to get a complete
picture of all available flights and prices, and yet some people will
call a single lender/bank and end up choosing the wrong type of
financing which can literally cost them thousands of dollars. A mortgage
broker’s knowledge and complete view of all financing options can enable
people with low income, self-employment, commissioned income, or even
credit problems to obtain excellent financing. A mortgage broker’s
compensation as your consultant (much the same as a travel agent) is a
finders fee paid by the lender. These lenders always offer better rates
and superior prepayment privileges and often shave as much as a half
percent point off the normal market rate.
PRE-PAID COSTS: These
are the costs that cover your escrow account for the future payment of
interest, property taxes and homeowners insurance. Property taxes are
set by the appropriate government taxing authority and, unfortunately,
are not negotiable. Depending on the regulatory agency, (FHA, Fannie
Mae, etc.) you will be required to pre-pay anywhere from 2 to 11 months
of property taxes at closing. Premiums for homeowners insurance are set
by the insurance company you select, and you are required to pay your
first year homeowners’ insurance plus two additional months at closing.
You can usually figure on your pre-paid costs being approximately one to
one & a half percent of your loan amount. PRIVATE
MORTGAGE INSURANCE:
This insurance is required for most loans that have a down payment of
20% or less. Private Mortgage Insurance insures the lender in the event
that you default on your mortgage payment and the lender is forced to
sell your property at a loss. THDA
FUNDING: The
Tennessee Housing Development Agency is a state subsidized program
funded by proceeds of federal tax exempt bonds, otherwise known as
Mortgage Revenue Bonds. Recipients are first time homebuyers with a
limited income, looking for modest housing. VA
LOAN: A loan
that is insured by the Department of Veteran’s Affairs. This type of
loan is available only to veterans, and is subject to the qualifying
guidelines set forth by the Department of Veteran’s Affairs.
How Can I
Qualify For a ZERO Down Payment Mortgage?
FHA
Loans An FHA
loan is geared towards first time homebuyers, and the goal of this
government program is to get moderate to low income families into homes
by providing incredibly reasonable and achievable mortgages.
This type of loan is officially considered a 3% down mortgage, however,
your down payment, closing costs and pre-paid costs can come from a gift,
another secured loan, a retirement fund, an investment or 401K, or any
number of approved sources apart from your pocketbook! Therefore, for
all practical purposes, this loan would require ZERO down payment, and
ZERO closing costs and pre-paid costs!
To qualify for this type of loan, you need to have: 2 years of steady employment in the same field of work
clean credit report for 1 year, but you can have credit problems
from the past
clean credit report for 2 years following a Chapter 7 Bankruptcy
clean credit report, but can even be in the process of a Chapter
13 Bankruptcy VA
Loans: A VA loan is available only to veterans and
is geared toward providing modest housing for individuals with moderate
to low income.
This type of loan is truly a ZERO down payment mortgage. The loan amount
is 100% of the sales price of your new home, plus the VA funding fee.
Therefore, the loan amount is actually slightly higher than the price of
the home! Your closing costs and pre-paid costs can come from a gift,
another secured loan, a retirement fund, an investment or 401K, or any
number of approved sources. In most cases, the seller will pay your
closing costs and pre-paids. Now, why on earth would they do that? When
the price of the home can be manipulated, it actually doesn’t cost the
seller anything. For example, if you are looking at a home that is
listed at $65,000 but is actually appraised to be worth $68,000, then
you can purchase the home for $68,000 and the seller will pay your
closing costs and pre-paids with the difference! It may sound strange,
but this happens VERY frequently!
To qualify for this type of loan, you need to have: 2 years of steady employment in the same field of work
clean credit report for 1 year, but you can have credit problems
from the past
original Certificate of Eligibility
copy of your DD-214
FHA
Loans As
stated previously, an FHA loan is officially considered a 3% down
mortgage. If you have saved enough to cover your 3% down payment and
your closing costs and pre-paids, then you are way ahead of the game.
Otherwise, keep in mind that your down payment, closing costs and
pre-paid costs can come from a gift, another secured loan, a retirement
fund, an investment or 401K, or any number of approved sources.
To qualify for this type of loan, you need to have: 2 years of steady employment in the same field of work
clean credit report for 1 year, but you can have credit problems
from the past
clean credit report for 2 years following a Chapter 7 Bankruptcy
clean credit report, but can even be in the process of a Chapter 13
Bankruptcy
Conventional Loans
Conventional loans are geared toward people with good credit and some
savings to cover down payment. There is a highly specific type of loan
for first time homebuyers called the Community Home Buyers program.
This Community Home Buyers loan does require a 3% down payment of your
own funds (not from a gift or a loan). As in a VA loan, the sales price
can be manipulated so that the seller can (and often does!) pay your
closing costs. However, you will be required to cover your pre-paid
costs with your own money. Because it is intended for first time
homebuyers, there is a maximum income limit.
To qualify for this type of loan, you need to have: 2 years of steady employment in the same field of work
clean credit report for 1 year, but you can have credit problems
from the past
3% down payment of your own funds
approximately 1 to 1 1/2% to cover pre-paid costs
How Can A
Government Program Help Me Come Up With My Down payment?
THDA
Funding The
Tennessee Housing Development is a state subsidized program funded by
Mortgage Revenue Bonds. This type of funding is geared toward first time
homebuyers with a moderate to low income who are looking for modest
housing. Because it is intended for first time homebuyers, there are
maximum income limits and limits on the sales price of your home.
This type of loan can cover your down payment, but does not apply to
closing costs or pre-paid costs. However, keep in mind that the sales
price can be manipulated so that the seller will pay your closing costs!
Your mortgage broker can help you
measure your financial capacity to have a loan. The way it is figured it
by dividing your gross monthly income by your total outstanding debts
(including the new payment on the home you are trying to buy).
Generally, you are allowed 40% of your monthly income to be used for
your housing expense and all other current obligations you have
outstanding (including credit cards, auto loans, student loans, etc.).
An even easier and more accurate way to figure how much home you can
qualify for is to get pre-approved for a loan, even before you begin
looking for a home! Yes, you can get approved for a home loan, even
before you find a home. You can schedule a free, no-obligation
appointment with a loan consultant at CLA Mortgage Services (1-800-761-9940). This will allow you to shop for your dream home in total
confidence, because you’ll know you’ve already been pre-approved for the
loan.
If you would like to know more about this pre-approval process, please
call 1-800-761-9940 for your FREE copy of the report “HOW TO GET
PRE-APPROVED FOR A LOAN, BEFORE YOU BUY!” Don’t talk to any salespeople;
simply leave your name and address on voice mail, and you will receive
this critical report in several days.
