This is the next post in my series discussing the doubts and concerns many Millennials have when it comes to buying their first home. My previous post addressed the myth that there are no available starter homes to buy, and pointed out several areas in Dayton that offer available inventory. In this post, I will discuss one of the number one worries that younger home buyers have- qualifying for a loan, and having enough money for a down payment. Many new buyers do not realize that there are several federal programs that offer assistance, and help relieve the stress of large down payments. If you wish to purchase a home then contact a real estate agent today.
The most common loan program utilized by younger buyers who are just getting started, is an FHA loan. An FHA loan is a loan that is provided by a traditional lender, but is insured by the Federal Housing Administration (i.e. the federal government). Because the loan is insured, lenders are able to provide loans to applicants who have lower incomes or riskier credit. Persons who have a credit score of 580 or higher may qualify for a loan, with a downpayment as low as 3.5%. Persons who have credit scores between 500-580 may still qualify for a loan if they can produce a downpayment of 10%. FHA loans also do not require established credit, and may be able to accept proof of responsible financial behavior, such as making rent payments and utility payments on time. Because of the lower credit score requirements, and the smaller down payment, may individuals who would struggle to qualify for a traditional loan are able to finance a house with an FHA loan.
One of the requirements of an FHA loan, is that the property in question must meet certain standards in order for the loan to be improved. For buyers who are interested in a fixer upper house, FHA’s program offers an option in the form of Section 203(k) mortgages. Section 203(k) allows home buyers to receive money for both the mortgage and for needed improvements to a home. Buyers may be able to pay for modernizations and improvements without having to apply for separate financing. Potential improvements may include significant structural alterations, landscaping, plumbing and electrical updates, roof repairs, or minor cosmetic improvements.
While FHA loans are meant for any lower income person who qualifies, there are other government programs that are meant to assist individuals who are in certain professions. The Good Neighbor Next Door program is a HUD program which assists law enforcement officers, teachers, and emergency medical technicians with buying a home in areas of a community that requires revitalization. Approved homes may be offered to qualifying individuals at 50% off of the listed price. In return, home buyers must commit to living in the home as their sole residence for at least three years.
Finally, the VA provides housing programs to active military, veterans and surviving spouses of military members. VA loans are offered by private lenders, and are partially guaranteed by the VA. VA loans do not require a down payment and often offer highly favorable terms, such as low interest rates.
The first step to applying for any of these federal programs is to discuss your specific situation and housing goals with a qualified lender. This may be your credit union, a representative from your bank, or a private lending institution. A professional loan officer will be able to answer your questions, assist you with the application, and give you an idea of what you may qualify for. As a Dayton realtor I assist those looking for a starter home. Contact me today.
I also service Beavercreek, Centerville, Clayton, Englewood, Oakwood, Fairborn, Harrison Township, Huber Heights, Kettering, Miami Township, Miamisburg, Riverside, Springboro, Trotwood, Vandalia, Washington Township, West Carrollton, and Xenia.