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First Time Home Buyers, No Money, No Problem! |
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By Samantha McDaniel
Premier Mortgage - Blue Springs, Missouri
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The main reason people hesitate buying a new home is money. Most people feel that if they do not have at least a few thousand dollars in the bank, that their dream home is out of reach. Contrary to this popular belief, this is a grave misconception. For those who have average to excellent credit, lenders are eliminating the need for a down payment by offering 100% loan programs. The only costs associated with these types of loan programs are the settlement charges, commonly known as closing costs and prepaid items. For those homebuyers with a few more blemishes on their credit, an FHA loan is an option. FHA loans require a minimum investment on the buyer's behalf consisting of at least 3% of the sales price, which can be obtained from a variety of sources.
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To accompany these types of loans are several sources the buyer can take advantage of to obtain the cash needed for the settlement charges or minimum investment. The most obvious resource any homebuyer has is a relative or close family friend. Another source of private assistance is an employer or labor union. Many lenders will allow any of these people, or businesses, to gift (or loan) the entire amount needed. And if in the financial position to do so, most family members or employers are happy to do so; as they realize the value of homeownership.
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A second option for the homebuyer is to secure their investment from a charitable organization which offers gift down payment assistance. The non-profit organization will give the buyer a percentage of the loan amount to use towards the down payment and/or settlement charges. This money does not have to be repaid and no other restrictions apply to the buyer. However, the seller of the home must agree to participate in the program, which consists of the seller donating the amount gifted to the buyer plus a service fee to the charity. Usually, when going this route, a full price offer should be made.
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Bond money is also available and is provided by city or state community development departments. This source is similar to the gift down payment assistance in that a percentage of the sales price is given to the homebuyer (not to exceed a specific dollar amount). The money can be used for the down payment and/or settlement charges and is not paid back. Another benefit is there is no cost to the seller so it is easier to negotiate sales price. One thing to keep in mind with bond money is that some restrictions may apply and vary per city or state. There may be income limitations, recapture penalties, educational requirements, etc., which should be carefully considered before taking advantage of this option.
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Finally, the seller of the home can be very helpful. First, an active seller may participate in the gift down payment assistance programs. Further, the seller is usually allowed to contribute 3% to 6% towards the buyer's settlement charges. Again, this money does not have to be paid back but the seller may require a full price offer.
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These resources give a whole new meaning to buying a home. No more is a 20% down payment required. Using one, or more of these options help homebuyers overcome the financial obstacle. Many of our clients are purchasing their dream home for the same as it costs for a months rent; others are moving in for absolutely nothing. So, wait no longer! No money? No problem!
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Home address for last two years:
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How long have you been at your current job: |
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Total amount of money for down payment on a home:
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