6 Things First-Time Home Buyers Should Know in 2014
Assistance for first time home buyers in Minnesota is readily available. Here is some important first time home buyer advice and information you should know before you make your purchase.
- The U.S. Department of Agriculture (USDA) offers a zero down mortgage option for “rural development.” You may be thinking, “But I don’t want to live on a farm!” but keep in mind that certain areas you wouldn’t think of as “rural” may actually qualify for USDA rural development financing.
- Military veterans may use the VA mortgage loan to finance their first home.
- The Federal Housing Administration (FHA) has a 203(b) loan which typically has a lower down payment requirement, lower monthly insurance premiums, and lower closing costs than other mortgage loan programs. First time home buyers should look into the FHA loan.
- If you’re thinking of buying a foreclosed home, a HomePath Mortgage may be of interest. With a low down payment, no mortgage insurance required, and no appraisal needed, a HomePath mortgage can help you buy a fixer-upper for your first home. Also look into what’s called HomePath Renovation, a loan to help finance the purchase and remodeling of an investment home, lending up to 35% of the as completed value—no more than $35,000.
- Got your eye on a home that needs major rehab that will cost more than $35,000? Apply for the full FHA 203k loan, which will help you make necessary structural repairs so you can have a nice first home. A variation on this is the 203k Streamline loan for homes that need minor repairs, up to $35,000.
- First time home buyers should talk with a mortgage consultant. They’ll check your credit score and help you see where you’re at financially, and whether or not you’d qualify for a mortgage.
In Minnesota, contact Lake Area Mortgage, a division of Lake Area Bank at 651-209-2900 for help with finding financial assistance, down payment assistance and more. The experienced team at Lake Area Mortgage can answer your first time home buyer questions, and guide you in the right direction to make getting that first home go from dream to reality.
Federal Reserve Chairman Ben Bernanke urged lawmakers to form strong housing policies to help the housing market recovery and advance the economy. Bernanke made the comments during a Q&A session following a speech in Cleveland on Tuesday about emerging market economies.
His remarks come at a time when more than 6.3 million homes are 30 days or more behind on their mortgage payments or in foreclosure, according to Lender Processing Services.
The Fed has taken steps that have been keeping mortgage rates hovering at or near record lows in recent weeks, but with unemployment still high, Bernanke said that record-low interest rates donâ€™t seem to be helping the housing crisis.
During the speech, Bernanke called long-term unemployment a national crisis. About 6.2 million Americans, or 45.1 percent of all unemployed, have been jobless for more than six months a total that is at its highest point since the Great Depression, HousingWire reports in citing government stats.
“Clearly getting more money into the hands of home owners who spend it could help to fuel GDP growth,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in remarks on Wednesday. “This would reduce one of the impediments to a more significant effect from the monetary policy actions taken to date.”
30-year and 15-year fixed-rate mortgages hit record lows again this week reported by Freddie Mac in its weekly mortgage market survey.
“Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week, says Frank Nothaft, Freddie Mac’s chief economist.
Here’s a closer look at rates for the week ending Sept. 15.
30-year fixed-rate mortgages: averaged 4.09 percent this week, down from last week’s previous record of 4.12 percent. Last year at this time, 30-year rates averaged 4.37 percent.
15-year fixed-rate mortgages: averaged 3.30 percent, dropping from last week’s record low of 3.33 percent. Last year at this time, 15-year rates averaged 3.82 percent.
5-year adjustable-rate mortgages: averaged 2.99 percent this week, up slightly from last week’s 2.96 percent average. A year ago at this time, the 5-year ARM averaged 3.55 percent.
1-year ARMs: averaged 2.81 percent, down from last week’s 2.84 percent average. A year ago, the 1-year ARM averaged 3.40 percent.
You are eligible to purchase on a government loan, 3 years after the date of
- sherrif sale
- discharge date if included in a bankruptcy
- date of sale if short sale
Please beware and make sure if you are 1-2 years out you are checking and watching your credit to make sure that the below scenario does not happen to you.
You are also eligible for first time home buyer status where you may be approved for down payment assistance.
Today my client was beginning a mortgage pre-approval to purchase a new home. Due to husband’s loss of job in 2007 they lost their home to foreclosure. I was confident after my initial conversation that they would have no problem approving for a new loan. The sheriff sale was over 3 years ago. Both buyers have stable full time employment for the past 2 years. They had paid off a Mercedes lease 2 months ago and over $65,000 in credit cards, student loans, and unsecured debt in the past 24 months. There had been no late payments or collections in the past 3 years.
Unfortunately there was a surprise. Even though the home had foreclosed in 2007, EMC mortgage corporation still reflects they owe $129,000 on a home equity lien. EMC is reporting them late every month for the past 3 years. My client immediately called EMC and was told they still owe $129,000. The only solution will be hiring an attorney. Their credit is further damaged beyond the damage incurred by the initial foreclosure They should have over 700 credit scores after significant payoff of all debts and time elapsed, however their score is 576 today. We cannot help them purchase at this time until they agree to get EMC to settle, write off debt, or they pay it off.
For buyers who do not need or qualify for down payment assistance we have the Minnesota Mortgage program comes with a subsidized interest rate .375% – .625% below market rate for government loans and .25% less for conventional loans. Mortgage daily interest rates can be seen at www.mnhousing.gov
The 1st question my first time homebuyers ask is an underwriter looking at when trying to get approved for a new mortgage. The answer I always give is it’s big picture. Here are the primary points.
Credit- underwriters are looking for a minimum of a 620 credit score. Having said that they are also looking for credit quality and credit depth. How many tradelines do you have and for how long? A borrower could have a 620 credit score with 3 settled collections and $250 Macys credit card. In this instance this wouldn’t be an automatic denial, however the other aspects of their finances must be very strong. 3 years after a foreclosure or short sale, 2 years after a chapter 7 bankruptcy, and just 12 months after a Chapter 13 (with trustee permission) you can purchase a home again. BUT the underwriter will be looking at 2 things. Did you re-establish new credit and have you paid it on time? They will also be looking at the immediate previous 12 months. If in the last 12 months you were late on your car twice and accumulated 2 new utility collections an underwriter is not going to approve that loan due to previous financial catastrophe and failure to prove yourself credit worthy again.
Income/Employment- Is it consistent, stable, and likely to continue for 3 years. For employment you need a 2 year work history.Full time enrollment in secondary education does count for part of that history if your current job is full time. If your employment status is seasonal, temp worker, contractor, self employed, or part time you must have a 2 year history (no secondary education waiver) If you have bonus, overtime, or commission income that you would like to use for qualifying you must have that job for 2 years. In the case of child support, alimony, social security disability, ect you must prove stability of past receipt and proof it will continue for 3 years minimum. In the event of child support you’d prove the child’s age along with paternity court order or divorce decree For disability income you’d provide a dr’s note indicating your disabled condition is not likely to change in the next 3 years.
Assets- As you can see there are many sources for help with down payment. The main important thing important with assets is clean bank statements. I define clean as no cash, no non payroll deposits unless a tax refund, insurance settlement, ect. “my mom owed me some money and she paid me back” is not going to work for underwriting. When receiving down payment assistance 99% of the programs require a percentage in contribution of “your own funds” if someone paid you back, gifted, or lent you money it is not your own funds. Unfortunately stated explanations are rarely acceptable. Definitely bounced checks, NSF’s, overdrafts onto a line of credit, or regular overdrafts are acceptable. This indicates to an underwriter that you are having difficulty paying your current debts and obligations without having a home mortgage debt.
Condominiums are just airspace within the unit surfaces. Legally known as “vertical subdivisions,” condominium owners own just the expensive airspace between their floor, ceiling and walls to the inner surfaces. The building structure is owned by the HOA, including the plumbing and wiring. The HOA usually also owns the common areas, such as hallways, elevators, land and parking areas. However, sometimes the common areas are owned by the individual condo owners as tenants in common, with the HOA responsible for maintaining the common areas.
Condominium owners often have the exclusive use of a specific additional area, such as a patio, balcony, storage area, and/or garage parking space. But the HOA usually has maintenance responsibility for those exclusive control areas that are part of the common area.
Townhouses and PUDs (planned unit developments) are slightly different. Townhouses are usually two-story condominiums with common walls shared with the adjoining townhouses. A few townhouses include ownership of the land beneath each townhouse, but many do not include the land that is owned as a common area by the HOA. However, if the townhouse is part of a PUD, then the homeowner usually owns the land beneath their unit. Either way, the HOA is responsible for the townhouse exterior maintenance, just as it is for traditional condominiums. Of course, individual townhouse and PUD owners are responsible for their interior maintenance, such as a dripping faucet or a plugged toilet.
There is much confusion over townhomes that are legally condos. Please make sure prior to viewing townhomes that the legal description on tax records is lot/block NOT CIC. If it is a CIC it is legally a condo even though marketed as a townhome. There is a link to the tax records on all online MLS links. Or you can go directly to the county website. Often times the listing agent will incorrectly state FHA/VA financing available because they haven’t done there homework. We get numerous clients who fall in love with a townhome that is legally a condo and not FHA approved prohibiting them from purchasing. If it is a CIC you will then need to check here https://entp.hud.gov/idapp/html/condlook.cfm to make sure it’s FHA HUD approved. You aren’t done yet, then you must make sure to check the expiration date and the concentration percentage. There cannot be more than 51% FHA concentration in any one development.