First Time Home Buyer Programs
Who Can offer First Time Buyer Programs?
I get calls all the time from first time home buyers and asking about first time home buyer programs and if I know anybody who offers them. Lenders will do large marketing campaigns and strategies stating they offer “first time home buyers programs. The reality is, pretty much all lenders offer First Time home buyer programs. There are tons of programs out there and most of them
have access to the exact same programs. It is just a matter of working with a good lender that knows all of the programs and better yet, putting the buyer in the right program. Each scenario is different so different programs allows the lender to get creative and determine which route is best. That said, I always tell buyers….don’t get sucked into a pitch that one lender is the only lender that can offer it. That is just not true. 100’s of lenders have access to the exact same programs. The other critical piece is the Lender and the Realtor being on the exact same page so when it comes time to write an offer, the offer can be built to be competitive as possible while also working for the buyer.
How do first time home buyer programs work and are they free?
To keep things simple, first time home buyer programs assist buyers will providing the minimum down payment on a new home. On an FHA loan the minimum down payment is 3.5% of the purchase price. By no means are they free as the lender increases the interest rate to off set the costs and the cost can also be placed in the loan. First Time Home buyers also have to attend a class in which they get educated on responsible home ownership, payments and etc. The process is actually very easy and it is a great way to get into a home with Zero Down payment.
Are there other costs involved with buying a home?
Absolutely! But there are ways around that too! Every loan will having closing costs on top of the Down payment. The closing costs are things like building the escrow account for taxes and insurance, HOA Fees, Lender Fees, Title Fees and etc. They are typically about 1.75% – 2% of the purchase price but as the price on the home goes up, that percent goes down. You also have to consider the cost for an inspection and an appraisal. An inspection is about $350 and an appraisal is about $600. Keep in mind, those number change based on the size of the home. If you do not have the funds to cover closing cots as well, there are options. 1.) The Lender can put them in the loan and raise your interest 2.) In the offer, you can ask the seller to pay the closing costs. In a sellers market, this is sometime tough to pull off. Put of those the options, the better way to go is to typically have the seller pay for them as your payment will be lower. The bottom line though, it all comes down to how long you plan to be in the home.
So Can Truly Buy a home with no Money in the bank?
That’s a tricky questions. Yes and No. The seller typically always requires the buyer to provide earnest money. Earnest Money is money that the title company holds on behalf of the transaction that ultimately protect the seller from the buyer walking away from the deal for no good reason (inspection issue, loan qualification and etc). As an example, lets say you as the buyer does an inspection on a home and then ask the buyer to fix things that are important to you but are not really issues for other buyers and they spend $1000 doing so to make you happy as the buyer and then 2 weeks late you decide you like a home down the street better. The sellers does have a right to keep that money but it is typically tough to do so. Sellers in Colorado typically require an earnest money in the amount of 1% of the purchase price and to be delivered 48 hours after an offer is accepted (executed by both parties).
If you are getting down payment assistance and the lender or seller is paying for your closing costs, there is a very good chance you will get a portion or the full amount of your earnest money back when you close the transaction.
In closing…..tons of first time buyers approach buying their first home using all of the above methods. I help buyers through the process all the time, from pointing them to a great lender, finding
them a home, writting an offer to suite the buyers needs and walking them through each step of the process! It seems hard….but the process in really not that difficult with the right team around you.