The news media today often makes it sound like homebuyers who can afford the monthly payment, still can’t find home financing. That couldn’t be farther from the truth. In reality, most people who are unable or unwilling to make their payments, have a difficult time finding financing today. The rest of us have many options available.
I often have prospective homebuyers tell me that they haven’t been able to save enough money for a downpayment. There may be a simple solution. Downpayment requirements vary depending on whether you are considering Conventional, FHA or VA financing.
Conventional financing today typically requires at least a 3% downpayment in today’s marketplace. Depending on other variables including property type (single family, townhouse or condominium) and any soft market requirements, the minimum downpayment may be as high as 10% for conventional financing. It is not uncommon for the seller to contribute 3% of the purchase price toward closing costs.
FHA financing currently has an option that allows a homebuyer to purchase with very little money down. FHA financing typically requires a 3% downpayment by the homebuyer, plus closing costs of approximately 3%, but seller contributions toward those expenses are common today. The first level of seller contribution is for the seller to pay 3% toward the buyer’s closing costs, which typically covers all of the closing costs. The second level of participation for sellers will cover almost all of the closing costs plus the downpayment for the homebuyer. A program called Nehemiah is available if both the seller and the buyer are willing to participate. With this program, the seller contributes up to 6% of the purchase price to Nehemiah. Nehemiah in turn gives the homebuyer a similar amount as a gift at closing. The gift covers the buyer’s downpayment and closing costs. In the 13 county Twin Cities area, the program will currently allow Nehemiah participation to cover all of the downpayment and closing costs required for a home with a price up to $373,000.00 as long as the property still appraises for the full purchase price. The homebuyer would be required to make a modest earnest money payment up front and pay for the appraisal when it’s ordered, but most of that up front money will be returned to the homebuyer at closing.
VA 100% financing is available for eligible veterans up to a purchase price of approximately $400,000.00. The VA also allows the seller to pay the veterans closing costs.
The bottom line is that if you are able to afford the monthly mortgage payment, it’s very likely you will be able to find a way to handle the financing. There are still options available.
Lou Auger, Summit Mortgage – Email – Website
