If you are at a point in your life where you are thinking about buying a home, keep in mind the 20% you have to put down when applying for a mortgage. Depending on where you live, this might some time to save up for. But if you live along the Front Range of Colorado, it can be a significant amount.
In this article by Emilie Rusch of the Denver Post, she points out that there are options to help people trying to set aside the amount of money it takes in the Denver real estate market:
Down payment assistance is there, but does it matter in Denver’s housing market?
Saving for a down payment can be a challenge, so challenging, in fact, that 25 percent of first-time buyers told the National Association of Realtors last year it was the most difficult part of the entire homebuying process.
After all, as the standard wisdom goes, you’re supposed to put down 20 percent of your home’s purchase price. In a market such as Denver, where the median sale price in July was $354,000, that can easily exceed $60,000.
“There are plenty of borrowers out there with good credit quality and the desire to be homeowners,” said Cris A. White, CEO of the Colorado Housing and Finance Authority. “They generally have the cash flow, the ability to make monthly loan payments, but it’s the down payment portion that has been tougher.”
But before you throw in the towel and resign yourself to renting forever, there is help out there — to the tune of 3 to 4 percent of the purchase price — and many people may be surprised to learn they qualify.
Metro Mortgage Assistance Plus, a program established by the city of Denver but offered in 29 cities throughout the metro area, provides 4 percent down payment grants for borrowers earning up to $95,880 for one- to two-person households and $111,860 for larger households.
Read more about this article here: Down payment assistance is there, but does it matter in Denver’s housing market?
This infographic is a little dated and unrealistic since there are very few homes available for $100,000. But it does give an idea of what type of down payment you need to be ready for depending on the category of loan. If you are going for a $300,000 loan, then you can triple all of the amounts:
The bad news is the cost of purchasing a home has risen so quickly in the Denver area that it is a hardship to save that much money. The good news is that there are options that can make it easier on your budget. Especially if you are a first time homeowner.
In this post by Ray Martin of CBS Money Watch provides some down payment options for home buyers.
Mortgage options for first-time homebuyers – CBS News
Still, first-time buyers can find some reasonable loan options that require lower down payments, some as little as 3 percent. Using a mortgage with a smaller down payment has advantages. You’re less apt to spend all of your liquid savings on the down payment, therefore less likely to become “house poor.” It’s especially important to go into home ownership with adequate cash reserves for emergencies and unexpected repairs.
Here are a few of the most popular low down payment mortgage options:
FHA Loans: Offered through participating lenders, these mortgages have typically been the choice for most first-time buyers. The most popular FHA loan is the 203(b) loan, a government-insured loan that allows a down payment as low as 3.5 percent and is widely available from lenders across the country. You’ll need a credit score of 500 (which is very low) and a history of making on-time payments on other loans. But condo purchases have some restrictions.
Home Possible mortgage: Issued through Freddie Mac, this loan allows a down payment of 3 percent to 5 percent. Requirements include that you use the home as your primary residence (no second homes, investment property, etc.), and you cannot currently own or share ownership in another house. You’ll also be required to complete an online home ownership education program before you get approved.
Conventional 97: Issued through participating lenders, this mortgage program allows just 3 percent down, as long as you apply for a fixed-rate loan of less than $417,000. This can be used only for single-family homes. At least one of the purchasers must be a first-time buyer, and you’ll have to complete a homeownership education program.
HomeReady loan: This mortgage loan is provided through Fannie Mae and is another option that requires as little as a 3 percent down payment. Its unique feature is that it allows non-occupant borrowers to apply. So parents can apply for this mortgage for an adult child who might still be working on establishing or improving his credit.
Here’s something to keep in mind when you get a mortgage with less than 20 percent down: You’ll pay a higher interest rate (about 0.25 percent to 0.5 percent more), and the additional monthly cost of private mortgage insurance (PMI). But as long as your home is appreciating, it’s possible to eliminate PMI in a few years by refinancing the mortgage.
Read the whole article here: Mortgage options for first-time homebuyers – CBS News
It’s hard enough to be fresh out of college with a lot of debt and still be motivated enough to save money to buy a home, but there is no better investment than real estate. Be sure to examine all of the potential options and shop around for the best interest rate. Prepare ahead and ask a lot of questions of your mortgage company so you fully understand what you are getting into.