06 Feb First time home buyer and 100% home financing
How to get 100% Home Financing
First Time Home Buyers
The first time home buyers leap from renter to homeowner can be a daunting one. The information listed here will help to ease some of the concerns of potential first time home buyers and assist in this life-changing decision. Included are statistics and studies on homeowners and renters as well as financing options and tips.
Should you sign another lease or take the plunge and buy a place of your own? Millions of Americans, especially first time home buyers ask themselves this question each day, as buying a house has become a very important study subject and strategic, wise operation.
In order for the first time home buyers to succeed, a few factors must be carefully taken into consideration, such as lifestyle and financial situation. There is no right or wrong answer for the first time home buyers when trying to make a decision to rent or buy. A good decision is one that is right for you. However, there are advantages and disadvantages to both.
Although most people own their homes, homeownership is not for everyone. If you move around frequently, have credit problems or if you cannot afford the home you want or simply do not want the responsibility of owning a home, you could be better off renting. Usually when renting, the landlord or owner of the property generally pays for the cost of any work or repairs that are done to the property. And, there is generally less up-front cash needed to move in. However, when you are renting a property, you are waving good-bye to your money each month. Renting a home does not provide tax advantages to the renter. Any and all tax advantages go to the landlord or property owner. Also, monthly payments for renters can be unpredictable, depending on the lease.
The first time home buyers should know that owning a home is a very big responsibility. The first time home buyers require careful planning and capability of accurate future perspective. Not only the first time home buyers has to take in consideration paying a mortgage each month, but it also involves other costs associated with the home, such as, the cost of insurance, taxes, repairs and general maintenance. First time home buyers are often startled by the investment associated with purchasing a house. The down payment required can be as much as 20 percent. You also have to consider other fees, such as lawyer’s fees, points, escrow costs, appraisals, and credit checks.
In spite of the risks and responsibilities, millions of Americans enjoy the rewards of home ownership. Purchasing a home is generally a sound investment. As you pay down your home loan, you are building equity. And unlike many things you buy, a home can actually increase in value over time. Home ownership does offer tax advantages. The mortgage interest and real estate taxes are tax deductible, which allows you to subtract part of your housing-related expenses from your income, thereby reducing your tax liability.
There is not much doubt that for most people owning a home is better over the long term than renting. When the first time home buyers made the decision to buy, they have to do their homework. Know how large a mortgage you can afford. If possible, get “pre-qualified” for a loan. When you find a home you like, carefully give it your own personal inspection. If you have questions, seek the advice of a professional. And, contact the Better Business Bureau for a reliability report on the mortgage company that you decide to do business with.
Also, it is notable that emotions, family and personal reasons all come into play in any home-buying decision. No one knows what the future holds for you, your family, your job or your finances. Between renting and owning a home there are big economic differences, as stated above and continued below. If you’re looking for the best return on your money, historically you’re better off investing in the stock market than buying a house. Primary homes generally don’t earn the investment return of financial instruments such as mutual funds. While the stock market’s long-term average rate of return is in the range of 8 percent to 10 percent, housing has appreciated on average in the low- to mid-single digits for many years. That means you shouldn’t buy solely to generate an investment gain.
On the other hand, Uncle Sam helps the first time home buyers by letting deduct* part of the mortgage interest and real estate taxes they pay each year (*Please ask your CPA or tax adviser for more details). Borrowers get the benefit only if they pay enough in one year to exceed the standard deduction. But that usually happens, especially during the first few years of a mortgage when most of each payment goes toward interest rather than principal. Home shopping for first time home buyers it’s an exciting, albeit nerve-wracking, experience. If you’re like other first time home buyers in the market, you probably have in mind exactly how your soon-to-be home will look. But it’s important not to fall into the bad decorating, dingy walls, and dirt-bare back yard equals bad-home trap. As a first time home buyer, if you don’t see past the hideous wallpaper, funky light fixtures, and avocado green carpeting, you may miss out on a home with great potential. And, if you’re looking for a home in a seller’s market where homes are being snatched up as soon as they go on the market, you’ll come to realize you can’t be choosy if you want to make a competitive offer. One of the first things to do as a first time home buyer is to get pre-qualified for a loan and determine the maximum you can afford to offer for a house. Don’t look at homes that are asking for more than 5 percent above your maximum, otherwise you’ll be setting yourself up for disappointment if you find the perfect – but outside your budget – home.
The housing and mortgage market can be a bewildering place to a first time home buyer. Firstly there are the trials and tribulations of finding a house (almost certainly your biggest ever purchase by some distance) and ensuring it is the right place to call “home” for the foreseeable future. Then once this massive decision has been taken, you are confronted by a sea of legal and financial complexities as you attempt to arrange a mortgage to pay for your new home.
As a first time home buyer, house hunting will eventually lead you to your ideal house. Once the offer is made, there will be certain aspects of the deal that need resolution (including the exchanging of contracts) before the house purchase can be completed. The process of making an offer is relatively straightforward. You contact the estate agent that is offering the property, and till him how much your offer is. The decision on how much to offer, however, is a little more complex. There are numerous factors to consider, not only regarding the value of the property, but taking into account your available finances.
In recent years, first time home buyers had to face booming house prices have made it harder for first time home buyers to purchase a house. But if you do have the financial possibility, buying rather than renting is far better. People benefit from this, as it results in a better security feeling (your own home), no more “lost” money as rent is considered and far more advantages as no more shared facilities when a property is subdivided etc.
Start now, take your time, and ask as many questions as you like. Being a first-time home buyer is challenging, but millions of people do it each year — and you can too.
100% Home Financing
Most people don’t know about 100% home financing so they keep renting because they think that they need a 10, 15 or 20% down payment to buy a home. With an average home running $200,000 these days, the though of coming up with $20,000 plus closing costs and insurance is enough to keep anyone in an apartment. The truth is you can get 100% home financing and end up buying a home with zero down! You see, mortgage lenders realize that it’s hard for first time home buyers to come up with the cash that a traditional mortgage requires. That’s why they invented the 100% home financing option. Not every bank or lending company offers 100% home financing but it’s pretty easy to find those that do. Here’s how it works: When you apply for 100% home financing you are asking for what lenders call a “piggyback” or 80/20 loan. What a 100% home financing loan really is amounts to receiving a first and a second mortgage at the same time. The first mortgage covers 80% of the home’s selling price while the second mortgage covers the remaining 20%. When you add them up you’ve got 100% home financing! There are 3 benefits to 100% home financing. The first one is pretty obvious. Whatever money you had in your savings account before you bought your home, you’ll still have in your savings account after you close. With 100% home financing you don’t need to touch any of your own money. The second benefit is that you won’t be required to buy PMI (Private Mortgage Insurance), which is a type of insurance that a lender requires when your down payment does not equal at least 20% of the mortgaged amount. With 100% home financing, the first 80% is covered by the first mortgage, and the remaining 20%, which is the amount that the buyer usually puts down to avoid paying PMI, is covered by the second mortgage. The third benefit is the fact that the payments for the second mortgage that you take out under the 100% home financing agreement may be tax deductible while PMI is never tax deductible. You might think that accepting 100% home financing will mean that you’re going to get socked with high interest rates. Not true! If you have good credit, and acceptable FICO scores, your mortgage interest rate for 100% home financing should be right in line with rates for conventional mortgages and conventional second mortgages. The only real difference between a conventional mortgage and 100% home financing is you get to keep the money that you would normally put down. Even if that doesn’t work out to be true in your particular case, 100% home financing mortgages usually always work out to be cheaper than combined cost of a conventional mortgage where the buyer has put less than 20% down plus the additional expense of PMI. There are good points and some not so good points to consider before you apply for 100% home financing. Of course, the obvious good side is that you can buy a home with no money down. After all, that’s what 100% home financing means. If you opt for an interest-only payment plan, you can also get your payments down to the smallest amount possible. That actually makes 100% home financing a double win. The major downside of 100% home financing comes into play if your house should lose substantial value in the future. You may end up being “upside down” on your mortgage which means that you owe more than the house is actually worth. There is no stigma or reflection on your personal credit when you apply for 100% home financing, so why spend all of your money just to buy a home. Get 100% home financing and use that money for something else!
the criteria is very easy. Your middle credit score must be above 580 and have two trade lines (credit card, student loan, car loan or any other cards or payment that shows your credit report) open for at least 12 months. Discharged chapter 7 more than 6 months ago is ok. No foreclosures within last three years and no collection within last two years.
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