1. Get professional help! No, not a therapist (that’s another column for another day) I mean a mortgage broker. While my first experience with a mortgage broker was depressing, it did teach me a lot. I learned how much I needed to save, how much of a down payment I needed, what I could afford, etc. Even though the news may be hard to cope with, it’s a great reality check and honestly, it’s so much easier to work towards a goal when you have all of them nicely defined on a paper for you.
Another benefit to a mortgage broker is that they will be able to find special programs you qualify for that you probably had no idea that existed. For example, the prospect of a house seemed a lot more realistic when I learned I qualified for an FHA and a USDA loan. If you’ve been poking around in the housing market, you’ve probably heard of these, but here are the basics of what they are:
• Federal Housing Administration (FHA) loans are backed mortgage loans that have historically allowed lower income Americans to borrow money for the purchase of a home that they would otherwise not be able to afford. There are smaller down payments required (usually 3.5 percent down which is like $3,500 for a $100,000) and competitive interest rates.
The FHA even just rolled out a new program for those who have recently gone through a foreclosure. You still have to have 3.5 percent down but your credit score only needs to be in the 600’s.
• A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you to purchase a home with no money down and at a lower monthly payment than other loans. It finances 100 percent to qualified buyers, meaning all closing costs can either be paid for by the seller or financed into the loan. The only downside is the loan does dictate where you live because you have to live in an approved rural area.
Those are some really common and popular loan programs but there are so much more. Like a Veteran’s Administration loan (VA loan) for those in the military. Its biggest draw is no down payment but there are several other benefits.