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Creative Financing for First Time Home Buyers

FirstTimeHomebuyers wide Creative Financing for First Time Home Buyers

by Christine Moscinski, Guest Writer

OK, so you’ve heard it’s a great time to buy for so long, the market is better and interest rates are still low – you’re thinking it’s a good idea to buy a home.  You’ve been looking on the internet for homes, getting an idea of prices in different markets, talked with your friends and family and discussed your plans. You even found a great Realtor and received your pre-approval from your lender and he tells you the great news. You definitely qualify for an FHA loan because your credit score is well above the 640 requirement. Your debt to income ratio is excellent and you qualify for the lower down payment of 3.5 percent.  

That’s great news!

But the home that you want to buy is $150,000 and the lender explains that in addition to the 3.5 percent down payment you will have to pay for closing costs which is an additional 2-4 percent or $3,000 – $6,000. This brings your total to over $11,000 and you only have $8,000 saved up for this important purchase.  You know it’s your turn to get an excellent deal and it’s definitely better and more economical than renting.  

You calculate your totals with the lender again. Your monthly payment would be approximately the same amount as you already pay for rent which is excellent your thinking and you really want to make this happen. 

But now you’re thinking, “Where am I going to get the rest of the money”?  

If you are short on some funds, there are a few options that may work for you.

Here are a few ideas:

  1. Borrow – Ask for some of the down payment from a family member or employer
  2. 401(k) – Depending on your plan and restrictions you can borrow from your 401 (k) but check with your plan administrator for complete details.
  3. Seller concession – The Seller may be willing to contribute some money towards your down payment up to 6 percent (there is talk of reducing this amount to 3 percent in summer of 2011).
  4. Fannie Mae HomePath Homes – REO homes that are great deals for buyers and you may qualify for a grant or secured loan from a non-profit organization and not have to pay additional PMI insurance.

In today’s market the first-time home buyer has to have a great Realtor on their side to make sure they get the most for their money, so don’t wait – get started today!

For mortgage glossary click here

Christine Moscinski is a Realtor®-Broker Associate at Real Living Gobber Realty in Westchester, IL.

See more tips, checklists, and resources at the First Time Home Buyers home page at REALTOR.com

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