Committing to become a homeowner takes courage. It commits you to monthly payments, annual tax bill and all the unknown maintenance issues that may crop up. It is a fact that the larger down payment that can be put down on a property purchase the better rate (up to a point) a borrower can get. First time home buyers often do not have a large (20%) down payment to use toward the purchase of a house. Searching for rates on the internet or calling local lenders will result in a general idea of what rates are available. Luckily there are state and federal loan programs available for first time home buyers. These programs often make mortgages with low down payments and some provide grants to provide funds for down payments. Before deciding on a specific rate, first time home buyers should look into specific loan programs that allow for low down payments or are designed for first time home buyers. Once you understand the loan programs available then shop the lenders that offer the programs and compare rates and fees. Not all low down payment loan programs are offered by all lenders. Be prepared for the fact that the smaller the down payment the higher the interest rate.
First time home buyer programs to look into are:
- FHA/VA – this is a government loan designed to for people who want to purchase a house but for either credit or down payment reasons are a higher risk than conventional loans. The VA offers a specialized program for veterans or active duty military personnel. Read more about these loans at the government site for Housing and Urban Development.
- State Sponsored Mortgage Programs – These are lending programs that are offered through states designed specifically to provide first mortgage financing at below-market interest rates to qualified home buyers who have not owned a home in the past three years. The amount of the mortgage is limited and low down payments (5%) are the norm.
- Conventional Mortgages: For first time home buyers that have saved enough money to have a 20% down payment., shop and compare a loan options. Select several mortgage providers (banks credit unions and brokers). May sure you are asking for quotes on the same kind of mortgage with the same time period If this is the case then shop lenders by using comparative loan rates sites. Pay particular attention to the both the rate and points being charged.
Down payment grants:
In the past there have been a multitude of down payment grant programs that are through either government sponsored or charitable organizations. However recent law changes have restricted how the grants can be used. For instance a seller cannot provide a “grant” for a down payment or cosign costs. There are most common at the state and local level. While these grants are made interest free, in most cases it is a second mortgage and repayments is required when the home is sold, transferred or refinanced.