First Time Home Buyers, Students and Heroes, Oh My! Loan Programs That Help

First time home buyers are either persons who have never owned a home before or persons who have not owned a home for three or more years.  For many first time home buyers, mortgages, down-payments and closing costs are a mystery.  Often, people don't know what is available or whether they qualify.  Your REALTOR® is always a good place to begin.   Many of us are familiar with conventional and federal programs as well as some local ones that can offer additional assistance in certain areas.

Where do you start?
A good first place to start, if you haven't already, is to get a look at your credit reports from the three agencies to which creditors report.  They are Experian, Equifax and TransUnion.  The fastest, easiest way to get them is to log on to www.AnnualCreditReport.com.  Here, you can order a copy of each of the three reports once per year for free.  In order to see your credit scores, which I recommend that you do, they will charge a small fee.  If you are serious about buying a home, it is a wise investment.

Upon receiving your reports and scores, you want to look for anything that looks unusual.  For instance, credit reporting is not perfect and sometimes things appear on your credit report that are not actually yours.  If you find something unfamiliar on your report, you have the ability to challenge the item and have it removed.  The instructions for doing so for each agency is listed on the site.

You also want to look at each of your accounts to verify that none have reported delinquent or in collections.  All is not lost if you find some of these; however, the lender you eventually work with will likely ask you to explain or pay these to qualify.

The advantage of reviewing your own credit prior to beginning your home search is that you can find problems before you begin and correct them before they become an issue at loan application time and cause you to lose out on your dream home by either zapping your savings to clear up bad debt or delaying the closing beyond the contract dates.

Getting help.

If you are having trouble understanding your credit report, your REALTOR® can usually assist.  Most REALTORS® are also pretty adept at pre-qualifying in order to help you understand your price range based on income, debt, and current interest rates, and others work directly with several preferred lenders that will do the job.  Either way, it is important to make an honest list of all debt prior to sitting down together.  Don't forget things like child support and alimony payments, other loans, credit cards, loans for which you have co-signed, etc.

How much can you afford?
A good rule of thumb is that your prospective mortgage payment should be less than one-third of your monthly gross income.  However, other debt may play a role in the maximum payment for which you will qualify.

Other criteria to consider is that you should be able to show two years of steady employment with consistent or increasing pay.  Over-time and second jobs will not count unless they are consistent and ongoing long term (often 1-2 years).  Bankruptcies must have been discharged, in many cases, at least two years ago and foreclosures often must have been finalized at least three years ago.

How much cash will you need?
Most programs have established a minimum down-payment.  Closing costs are an additional cost representing approximately 3% of the loan amount.  However, there are programs available that will provide down-payment assistance and your REALTOR® should, in most cases, be able to get the seller to contribute to your closing costs.  Gift money from relatives may also be an option.  Additionally, qualifying Veterans have the ability to use the VA $0 down-payment program.  Therefore, in many cases it is possible to buy a home with very little money.

So what assistance is available?
In addition to low down payment loans, there are grants to help with down-payment assistance in Cleveland or East Cleveland, as well as some suburban neighborhoods, grants for first-time home buyers and recent college graduates with at least a two-year degree purchasing their first home.  Coupled with the previously mentioned assistance, Ohio also rewards its heroes with special financing rate reductions on certain loans.  Ask your REALTOR® for more details.

Think you are ready or would like to find out if you are ready?  Give me a call and I will be happy to help you begin the process.  The keys to your new home may be just within reach.