by Ann Huskey
It is never too early
Buying a home takes considerable financial planning and resources. This is why it is never too early to start planning your future home purchase.
Resources:
Free Financial Consultation
Michelle Davis – Primerica
Cell: (850) 688-0407
Office: (850) 210-1193
MichelleLynnDavis@primerica.com
TLC Credit Counseling – (Flat Fee Charged For Credit Report)
WEBSITE
Jacquelyn Calloway – The Credit Doctor
WEBSITE
Office: (850) 466-7136
Buying A Home
Ideally, a lender would love to see you come up with 20% to put down for your home purchase. However, for the majority of first time home buyers, this is very difficult. Luckily, if you do not have a lump sum quite large enough, there are still options. You will likely still need to come up with cash for your down payment and closing costs, but it may be considerably less than you think. If you are able to put down more than 20%, the lender may be willing to approve a larger loan for your home purchase. However, if you have less, you’ll need to shop around for loans that can accommodate your budget.
Various private and public agencies, such as Fannie Mae, Freddie Mac, the Department of Veterans Affairs, and the Federal Housing Administration are able to provide low down payment mortgage programs through the use of banks and mortgage companies. If you qualify for one of these programs, it’s possible to pay as little as 0 – 3% up front.
In addition to the down payment, there are other costs involved in buying a home. These costs may include the appraisal fee, origination fee, loan fees, attorney’s fees, inspection fees, the cost of a survey, the cost of title search, and the cost of title insurance. Closing costs can easily add up to more than $10,000. Often they run from 3 – 5% of the mortgage loan amount.
Private Mortgage Insurance
A warning: With a down payment of under 20%, you will probably wind up having to pay for private mortgage insurance. PMI (private mortgage insurance) protects the bank’s interest in the chance you fail to make your mortgage payments. PMI adds about 0.5%, in total, of the total loan amount to your mortgage payments for the year.
Options:
- FHA – 3.5% down
- USDA – 0% down
- VA – 0% down
- CONVENTIONAL – 3% down (for first-time homebuyers)
Borrowing Money To Buy A Home
If your available cash on hand doesn’t quite cover your home purchase needs, you have several options.
IRA – First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account. However, buyers withdrawing from their IRA must pay taxes on the amount withdrawn.
GIFT – First-time homebuyers may also receive a cash gift for their home purchase. This gift may be up to $14,000 a year from each parent without triggering an additional gift tax. Gifts do require additional paperwork, so be sure to tell your lender if you have received a gift.
EMPLOYER – Some employers offer home buying assistance. Check with your HR department and see whether your company offers incentives or help for your home purchase.
