How muc is a downpayment for a 1st time homeowners mortgage?

Deal Score0

My husband and I are looking into buying our first home (we currently live in an apartment but have a baby on the way). The home we are looking at is a new build. It is $ 115,000. This would be our first home. We don’t have much saved p because we weren’t really planning on buying a home so soon. Are there any special programs/loans for first time home buyers? We have decent credit (660’s).

We make about $ 40,000/yr combined income (I work part time). Is this house something that we could afford when interest/insurance/etc payments are included? We have no debt.

8 Comments
  1. Reply
    Andrea B
    February 4, 2011 at 3:45 pm

    The ideal downpayment is 20% because it allows you avoid have to pay private mortgage insurance. You should be able to afford this loan, I have one for $ 100,000 and the monthly payments are $ 747 total with escrow, principal, and interest.

  2. Reply
    Business Mom
    February 4, 2011 at 4:11 pm

    attempt to put down a min of 20%.
    also stick with a 30 year fixed rate (no prepay penalty) loan

    your other expenses besides your monthly payment will be homeowners insurance, taxes (local), water, trash etc.

    good luck

  3. Reply
    Cory Z
    February 4, 2011 at 5:04 pm

    Go to you bank first. They usually have first time home buyer programs. Getting a loan from the bank will also give you less closing costs. The more money you put down the better your rate will be and most loans it is around 20%. there are ways to finance more and put less down so just shop around with banks and brokers. Good Luck!

  4. Reply
    acatlam
    February 4, 2011 at 5:40 pm

    At least 20% down is correct. If you can swing a 30-year fixed rate mortgage is good, but a 15-year fixed rate mortgage will save you much more in interest. Studies show that most people don’t prepay their 30 year because life gets in the way.

    Congratulations on having no debt! Most people can’t say that. Keep up the good work.

  5. Reply
    courtney02908
    February 4, 2011 at 5:42 pm

    While putting down 20% is ideal some people just cant afford to. There are Fannie Mae programs out there for 100% financing with little to no out of pocket closing costs for people who have decent credit. The rates on these programs are also pretty decent. You should have no problem affording the payments as you have no other debt.

  6. Reply
    Kiki
    February 4, 2011 at 5:48 pm

    You’ve gotten a lot of good advice so far. I agree that you should start going to your bank and they can help to direct you to special programs for first-time home buyers. With a combined income slightly higher than yours, my husband and I qualified for a program which allowed us to put very little down–less than $ 2,000. We found a program that is through our state, so other states might have different things.

    Some advice–make sure you’re saving things like payment stubs, bank statements, etc.

    You, with or without the help of your bank, can figure out how big of a payment you can afford. (My husband and I used our rent as a ball park…we already knew we could afford that.) You can use interest calculators online to figure out what different payments would be considering possible down payments, possible interest rates, etc. Don’t forget that with a house comes property taxes, mortgage insurance (if your down payment is not big enough), etc. You will also want to have money for a house inspection and an appraisal. Finally, when buying a home, there may be expenses you’re not used to…will you need to buy a lawn mower? Will you want to pay for snow removal? These types of things seem minor, but just be prepared that there might be expenses you didn’t have before. Finally, when you initially move, it is possible that you will have bills to clean up from where you rented, plus bills from the home. It was not fun paying the last electric bill on our apartment and the first one on our house, etc. that first month!

  7. Reply
    carlos z
    February 4, 2011 at 6:26 pm

    It depends where you live, you can find resources that can answer your questions better.

    Guaranteed lowest cost Home Equity Loans

    It also depends on your credit history, do you know your FICO score?

  8. Reply
    Robin L
    February 4, 2011 at 7:19 pm

    First: Pay Off Your Debt
    It’s a common mistake for home-buyers-to-be: They focus on saving as much money as possible for a down payment instead of paying off other debts. A better approach is to use extra cash to eliminate credit-card and other high-interest consumer debt — even if that means you can put down less on your future home.

    Why? First, credit-card debt is expensive and limits your ability to save. The average interest rate on credit cards now stands at 14%, or more than double the 6.1% national average for a 30-year fixed-rate mortgage, according to Bankrate.com. Second, credit-card debt will limit how much you can borrow. That’s because lenders often won’t allow your total monthly debt service — which includes payments for credit cards, student loans and car loans, as well as homeowner’s insurance, property taxes and a mortgage — to exceed roughly 40% of your gross income.

    How Much Can You Afford?
    The answer to that is a function of two things: How much you can borrow and how much of a down payment you can muster. As a rule of thumb, your annual mortgage payment, taxes and homeowner’s insurance shouldn’t exceed 28% of your gross income. Then determine how much cash you have for a down payment, leaving yourself enough left over to pay those pesky closing costs, which can add up to 3% to 5% of your total home’s value (plus a little something extra for emergency repairs once you move into your new home).

    Types of Loans
    Now you’re ready to start shopping around for the right loan. A first-time home buyer with a steady job and good credit can buy a home with no downpayment these days. These loans are more available, and more reasonably priced, now that they’re acceptable to Fannie Mae and Freddie Mac. (The two so-called government-sponsored agencies purchase mortgages worth up to $ 417,000 on the secondary market — $ 625,500 in Alaska and Hawaii — absorbing the original lenders’ financial risk. And now Fannie Mae and Freddie Mac will buy 100% mortgages.)

    But the more money you can muster for a down payment, the more options you will have. For example, Fannie Mae allows borrowers who can put down 5% to qualify for a loan on a smaller salary than with a 3% down payment. You will need to find a Fannie Mae-approved lender to take advantage of this program.

    Private lenders are also coming up with their own programs to tap into the first-time home buyers’ market. Washington Mutual, for example, offers a program for buyers with a 10% down payment: Instead of charging for mortgage insurance, the savings-and-loan builds the cost into the interest rate, making it tax-deductible (which mortgage-insurance premiums aren’t).

    And if you really want to get creative and avoid paying mortgage insurance altogether, you can take out two piggybacked loans. These are also referred to as 80-10-10s. First, you need to put down 10% of the home’s value. Then, you take out a primary loan, usually a 30-year fixed-rate mortgage, for 80% of the home’s value. This interest rate should be competitive. For the remaining 10%, you’ll need to take out a 15-year fixed-rate mortgage at a far less competitive rate — as much as two points higher than the market. Combine the two monthly costs to come up with your total mortgage payment. Due to the complexity, a piggybacked loan is a bit more expensive than a traditional mortgage and carries higher closing costs. Still, they tend to be cheaper than paying private mortgage insurance.

    Questionable Credit
    Worried you don’t have perfect credit? With Fannie Mae’s “expanded approval” program, consumers with slightly blemished credit can also qualify for mortgages at competitive rates that are as much as two percentage points lower than alternative financing.

    f your credit’s still not good enough for one of Fannie Mae’s loans, you may yet qualify for a loan insured by the Federal Housing Administration, or FHA. These government-insured loans are issued with even more lenient credit criteria. You can also put down as little as 3% for an FHA loan. A portion of closing costs may be used to meet the 3% cash requirement. The seller may pay the closing costs for the borrower and the lender may also charge a premium interest rate, also known as rebate pricing, to fund the closing costs. Depending on the lender, interest rates are typically a quarter to half a point higher than those in the conventional market. To get a government-insured loan, make sure you find a HUD-approved lender or a mortgage broker who works with one.

    There’s no income limit to qualify for an FHA-insured loan. However, since these loans are geared toward helping first-time home buyers and low- to moderate-income families, there’s a limit to how much you can borrow.

    Down-Payment Assistance Programs
    Still having trouble coming up with that down payment? Each year HUD gives states and municipalities money to distribute to low- and moderate-income families for housing. Much of it is put toward down-payment assistance programs. Many young prospective home buyers may qualify for a grant (or in some cases a loan that’s forgiven if a home buyer stays in the home for at least three years) worth 3% to 5% or even more of the sale price to put toward their down payment or closing costs.

    To qualify for a down-payment assistance program, a consumer can earn no more than 80% of a region’s median income. Call your state housing finance authority, county housing and community development office or mayor’s office for an application.

    One final note of caution: Don’t confuse any of these programs with no-equity loans being offered to people who already own their homes. These high-cost, high-risk home-equity loans are a bad idea.

    Leave a reply

    Register New Account
    Reset Password