Columns
October 28, 2021
link to facebook link to twitter

Real Estate & Business

Scott Sheldon
How to get a first-time home buyer program
September 17, 2021

Buying your first home requires careful consideration of your cash, credit, and income. A first-time homebuyer is anyone who has not owned a house or any real estate in the last two years. Here’s what you need to know. The reality of it is that there really aren’t any special first-time homebuyer programs out there in the marketplace anymore. Being a first-time homebuyer does not mean what it used to. If you are thinking of buying your first home in a few years, please read.

When most people ask the question, do you have any 1st time home buyer programs? What they’re really asking is, do you have any programs that don’t require any down payment?

Let’s take a step back for example for a minute, shall we? Do you really think you should make that large of a high-ticket purchase without any money?

If you don’t have money for a down payment more than likely it’s probable that you probably don’t have 3-6 months or more of savings in the bank in case your financial circumstances change, or something financially goes wrong, right?  Don’t buy a house just because everyone else is doing it. Buy a house because you are ready and can afford it.

Yes, this might be a cold-hearted dose of reality, but better to have a cold dose of reality and get a course correction in your home buying plan than to buy a house you cannot afford, and then find yourself in a financial predicament which could carry dire financial consequences over the long haul, right?

That said, you don’t need to buy a house with the old school 20 percent down. Twenty percent down is the mantra in lending that you need to have in order to avoid paying foreclosure insurance also known as private mortgage insurance or PMI for short. On average a PMI can cost $70 to $80 per month per $100k borrowed per month so if you look at a payment of several $100 a month, that means you must have the income to offset that plus the principal interest taxes and home insurance payment as well. If you are buying a condominium, you must add in on top of that homeowner’s association payment.

It’s not just the down payment either when you buy a house. You are also responsible for closing costs. Closing can run 2 to 2.5 percent of the purchase price. It’s the same thing if you’ve ever financed a car. When you finance a car you have tax, docks and licensing at the car dealer which becomes applicable and the same applies when you buy a house.

The reality of it is if you want to buy a house in most markets you need to have a down payment of at least 3.5 for FHA and 5 percent down for conventional loan programs. Those two programs present a sure-fire way to get your foot in the door. As a good financial rule of thumb, it is also wise to consider having 3-6 months of savings in the bank plus your down payment plus closing costs. Don’t have it? Maybe you have savings in the bank, but you don’t have the money to further cash?  Be proactive- swallow your pride ask mom or dad or grandma or grandpa or a family member for help. There’s no shame in asking for someone for help and you might just come to find family is willing to help family more than you think.

 

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.