“Making the Finances Work When Buying a Home”
Last year I worked with a buyer who thought he couldn’t afford a home he was well qualified for, because the government was taking the max amount of withholding from each of his paychecks. His mortgage provider showed him how he could afford the house by changing his exemptions and how the mortgage tax credit would offset this reduction.
That client was referred to me, by another client who purchased his first home using downpayment funds supplied by the CT Home Finance Authority. CHFA provides downpayment assistance to low income buyers who qualify for a mortgage. Downpayment assistance becomes a 2nd mortgage paid along with the mortgage on the home they purchased. Since CHFA buyers are pre approved for less money than FHA, the buyer might want to go FHA with a 3.5% out of pocket downpayment to get the home of their dreams.
Other no money down alternatives include VA backed loans which don’t require monthly mortgage insurance and USDA. Due to population limits, not all towns qualify for USDA so you’ll want to check with a qualified mortgage provider.
Several of my first time homebuyers lived in the basements of their parents’ homes until they saved enough money to put 20% down for conventional mortgages. They still have a mortgage but they no longer have to pay private mortgage insurance (PMI) and the rates for conventional mortgages are lower than those insured by the government.
Last month, my clients closed a conventional mortgage with 5% down. They will still have to pay private mortgage insurance (PMI) until they have 20% equity, but their mortgage payment will be less than if they needed a government backed loan.
Next week, my clients are closing an all cash deal after they sell their current home. They will no longer have a mortgage, but they will still be responsible for property taxes, HOA (they’re moving into a condo), and homeowner’s insurance.
So where does the money for a downpayment come from? In her well written article, “4 Unexpected Mortgage Decisions every Buyer Will Face (and How to Make Them)“, Tara Reid, an agent in the San Fransisco area, discusses downpayment options to help you maximze your purchase.