Tuesday, July 1, 2008

FHA Loans and Other Financing Options

Although life has many twists, turns, and obstacles, one comfort many of us hold on to is that others have gone through the same thing. Any major step we take, whether it be graduation, marriage, a new career, children, etc, someone we know has already been through it and can give us advice. It is also important to know, that advice should always be taken with a grain of salt. The purchase of a new home, especially a first home, is definitely up there with major milestones in life. Surely you know others who have experienced this before you, and in some cases very recently.

While you should definitely listen to the lessons learned by others, and their advice that follows, you must also do your own research and investigations as every situation is unique.

Because of the current state of the financial world, people are making false assumptions based on stories they have heard. I met a nice young couple this past weekend at an open house whose friend recently purchased a home and had to jump through flaming hoop after flaming hoop in order to secure a loan. They needed 25% down, and in addition to that, their lender was requiring them to show six months of reserves in their checking account. With these guidelines, many people would be forced out of the home buying arena. While the story may be true for those particular people with their particular lender, it may not be true for you.

We have represented buyers in the recent past with anywhere from five to thirty five percent down. There is no steadfast rule when it comes to lending guidelines. Every situation is unique and is based on an equation made up of the lender, the buyer, and the property.

While it is true that the majority of lenders now require a larger down payment than they did a year ago, there are still options out there for those of you who do not have the ability to do ten or twenty percent down. One option is the FHA loan which now has the maximum loan amount of $729,750 and a required down payment of only 3%. Also, if it is a low FICO score that worries you, an FHA loan only requires a 580 or above. While the interest rates may be a bit higher, this may be a good option for you if you don't have a large down payment or a high credit score.

The moral of the story is that you need to talk to a lender yourself. Don't assume that because your friend, neighbor, or relative had trouble with financing that you will have the same experience. It is important to talk with a few different lenders and give them your specific information, as one may offer options that the other does not have.

This all brings us back to the importance of having a team. Your Realtor should have a few good referrals for lenders or mortgage brokers in their database. The connections that we make are not for profit, meaning we do not enjoy any financial gain from referring you to a particular lender. We do, however, work with people we trust and know that they have your best interests in mind.

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