Buying a home as the cost of money and rents continue to rise at interest rates close to historically lows Better deal for more people thinking about moving.
Certainly, there are many things to consider before challenging home ownership. You need to stay home for a few years, do a safe job with a reliable income, and promise to have enough savings on hand.
But for many first-time homebuyers, the biggest obstacle is the down payment. The general rule is that you need 20% of the purchase price as a down payment to get a mortgage. The average price of an existing home is about $ 247,700, which is about $ 49,500.
This is enough for many to get their own home, and today's first buyer is according to the National Real Estate Agents Association. The total and historical average is 40 percent.
Still, first-time buyers can find reasonable loan options that require a down payment of only 3%. There are advantages to using a mortgage with a low down payment. You are less likely to spend all of your liquid savings on your down payment, so you are less likely to be "poor". It is especially important to own a home with enough cash in case of an emergency or unexpected repair.
Here are some of the most popular down payment mortgage options.
FHA Loans:These mortgages offered through participating lenders are usually the choice of most first-time buyers. The most popular FHA loan is the203 (b) loan. This is a government-guaranteed loan that allows a 3.5% down payment and is widely available to lenders nationwide. You will need a credit score of 500 (very low) and a history of payments on time for other loans. However, there are some restrictions on purchasing a condo.
Mortgage Potential: This loan, issued through Freddie Mac, offers a 3% to 5% down payment. Requirements include that you use the house as your primary residence (no second house, investment property, etc.) and currently you cannot own or share another house. You must also complete an online home ownership education program before you can be approved.
Traditional 97:Issued through participating lenders,This mortgageprogram is as long as you apply for a fixed rate loan of less than $ 417,000. You can get a discount of only 3%. .. It can only be used in single-family homes. At least one of the buyers must be a first-time buyer and must complete a homeownership education program.
HomeReady Loan: This mortgageis another option offered through Fannie Mae and requires a down payment of only 3%. Its unique feature is that non-resident borrowers can apply. Therefore, parents can apply for this mortgage for an adult child who may still be working on establishing or improving his credit.
If you want to get a mortgage less than 20%, please note the following: Higher interest rates (about 0.25% to 0.5% higher) and additional monthlyPrivate Mortgage Insurance (PMI). But as long as your home is highly valued, refinancing your mortgage can eliminate PMI in a few years.
View all Ray Martin articles on CBS MoneyWatch »
Ray Martin has been a financial adviser and individual since 1986. He regularly appears as a contributor to the CBS Early Show, CBS NewsPath, and as a columnist on CBS Moneywatch.com and NBC-TV's morning newscast TODAY. He has also appeared at The Oprah Winfrey Show and is the author of two books.
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