Brenda Kellen: Great credit but no down payment
July 3, 2008
Q. I want to buy a home, have great credit, but not lots of money – is there any help for me?
A. Although many people can afford a mortgage payment in addition to associated costs and expenses to owning their own home, the thought of coming up with a sizeable down payment often keeps them from becoming homeowners. Charity organizations and federal institutions are available to these buyers to assist with this challenge.
Down payment assistance programs, both non-profit and federally run, provide interested, eligible homebuyers with down payment money for a home. The seller of the home assists the buyer by contributing a portion of sale proceeds to the homebuyer at the time of closing. Because federal and state laws dictate that the seller cannot give the funds directly to the buyer, the assistance programs provide a work around so that the sale stays within federal guidelines. The gift amount is determined by the type of loan that is being applied for. In addition, sometimes a seller can pay an amount of money towards buyer’s closing costs as well. The purchase price of the home is increased by the amount of the credit and the seller’s monetary contribution is shown as a debit on the settlement statement. There is not a need for the seller to bring money out of pocket for this type of concession.
The best source of funding comes through the Federal Housing Authority (FHA). The FHA is a branch of the Department of Housing and Urban Development (HUD) which was created in 1965. The prime responsibility of the FHA is to administer government home loan programs. The FHA insures the loan so the lender is protected in case of default. The FHA also looks at debt to income ratios differently. The standard in the lending industry is a debt to income ratio of 28/36%, but the FHA has a standard of 29/41%. This offers buyers with less than perfect credit an advantage. The FHA also works with people on however many loans they wish to pursue. This is not just a one shot deal for consumers. In the past, FHA loan programs have not been viable for the resort areas, but on March 5, 2008 the maximum loan limit was increased to $356,250 in Grand County. Summit County – a whopping $729,750.
There are other organizations that administer down payment assistance programs that are not run by the federal government. The most popular today are AmeriDream, Inc, The Nehemiah Program, and Partners in Charity. Be sure to ask your mortgage broker about all these programs to determine which one may be a good fit for your unique circumstances.
Do not assume home ownership is out of reach just because your savings account isn’t overflowing. Programs are available and taking time to research the different options may offer a solution.
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For more insight into the current real estate market, please contact me directly at (970) 485.1115, visit my website at http://www.gokremmling.com, or e-mail me at firstname.lastname@example.org. I have been working with Omni Real Estate for over 10 years, helping buyers and sellers in both Grand and Summit County.