Mortgage Updates

You will need a down payment. Down payment requirements vary depending on the loan type.  Most conventional loans currently require 10 - 15% down depending on the location of the property. FHA loans require 3.5% down and VA will still allow a veteran to buy with ZERO down payment.

One reason for find a knowledgable lender, especially if you are a first time home buyer, is to be provided with information as to options available for you.  Those options could include down payment assistance in the form of a silent 2nd or a grant. 

 A silent 2nd is a loan that has a fixed interest rate.  The interest is calculated once at the beginning of the loan...   On a silent 2nd there are no monthly payments due.  The entire amount is due at the end of 30 years or when the loan is paid off through refinance or sale of the property.

A grant is money that is advanced for closing that is forgiven over a certain period of time.  Most grants are forgiven over a five year period - 20% per year.  If you were to sell within the 5 year time frame, you would have to pay back on a prorated basis. 

Currently in California there are two grants available:

The 1st grant can make up the difference of3% of the down payment or closing costs for an FHA or VA loan,

The 2nd grant is available only to new home buyers and can be used for down payment, closing cost, or upgrades to the home. 

Both grants have income limitations (restrictions of how much income you can have based on household size).

Often City Governments will have Federal funds to be used in their affordable housing programs.  Mostly they fall in the silent second category.  They are not always administered by the city but by a sperate entity.  In California, Mercy Housing fulfills many of those functions.

It also helps to work with a lender that is knowledgable in first time home buyer financing.  Someone used to "writing" large loans with substantial down payments may not be "up to speed" on the grants or silent second loans available in your area. 

Additionally, gift funds would be an acceptable source for down payment or closing costs.  There again it is important to communicate with your lender.  Inexperienced lenders may assume that your funds are coming from one source, when they are actually coming from a gift.  Be sure to discuss this option with your lender.  It will be important to document the sourcing of your funds. 

Cash from your piggy bank is not acceptable.  So if you're inclined to cash you pay check and pay cash for groceries, utilities and other purchases... My advice is to keep as much in the bank as possible.  Redepositing monies saved at home is not wise and can delay a loan and closing.

Be sure to have a frank discussion with your lender about the cash necessary to buy a home.  Remember, an earnest money deposit as well as inspections will be a part of you sales contract.  They need to paid in advance of closing - but will be applied towards the final closing dollars.

Please feel free to comment.  For more information please visit my web site at http:www.ingridpierson.com