Freddie Mac’s Home Possible Mortgage is a great mortgage program designed for first time home buyers. What’s so special about this program is that it allows a home buyer to qualify for dramatically reduced mortgage insurance premiums with a minimum 5% down payment. The 5% down payment may be gifted by a family member. No reserves are required for a single family dwelling.
My most recent guide book, Your First Home Mortgage, is filled with information that I hope first time home buyers will find useful. Please feel free to share this book with anyone you know who is considering buying their first home.
You can find a collection of my other guide books and slide shows by visiting the Mortgage Porter library.
Remember, if I can help you with your mortgage needs, including buying or refinancing a home located anywhere in Washington state, I’m happy to help you! Click here for a free rate quote.
PS: If you’re interested in attending one of my home buyer seminars sponsored by the Washington State Housing Finance Commission, click here.
I’m pricing out a scenario for a first time home buyer who’s looking at buying a home priced at $250,000 and they have roughly 3% set aside for down payment plus closing cost. Since they have excellent credit, they are leaning towards conventional financing instead of FHA, which has much more expensive mortgage insurance (upfront and monthly).
The three scenarios quoted on this post are based on rates as of April 18, 2013 at 4:30 pm. Mortgage rates change constantly so if you would like me to provide you with a rate quote for your home located anywhere in Washington, click here.
Conventional mortgage “standard” (no special program) 30 year fixed with a loan amount of $242,500.
3.625% (apr 4.467%)… say, why is the apr so high? That’s because the pmi payments is factored into the apr. We also factor the appraisal cost, which most lenders do not. Net closing cost with rebate pricing is $2360 plus prepaids and reserves (taxes/insurance) leaves funds for closing estimated at $12,400.
Principal and interest payment is $1,105.92 plus mortgage insurance of $232.40 = $1338.32 (also referred to as the “PIMI” payment). Total payment with estimated taxes and insurance is $1643.74 (also referred to as PITI).
Home Advantage program with down payment assistance (second mortgage with zero interest and payments deferred for 30 years). This program does require home buyers to attend a WSHFC approved class. 30 year fixed with a loan amount of $240,500.
4.250% (apr 4.604%). Closing cost are estimated at $6218 (not including prepaids and reserves). With estimated taxes and insurance and credit for the second mortgage of $9,620 (4% of the loan amount) for down payment assistance, the total estimated funds for closing are $8,414.
The P&I is $1,191.00 plus monthly mortgage insurance at $24.23 = $1,215.23 (PIMI). Total payment (PITI). with estimated taxes and insurance is $1521.64
Fannie Mae HomePath program is only available to designated properties owned by Fannie Mae. No appraisal is required and there is no borrower paid mortgage insurance with credit scores over 660.
4.375% (apr 4.456%). Closing cost are estimated at $2323 after rebate pricing plus prepaids and reserves with funds due at closing estimated at $12,451.
The P&I is $1210.77 and there is no mortgage insurance. Total monthly mortgage payment (PITI) is estimated at $1516.19.
The programs listed above are not limited to first time home buyers. Which program is right for you depends on your personal financial situation and goals. It’s important to review your options and to make an educated decision.
If I can help you with your home purchase or refinance on your home located in Washington state, I’m happy to help you!
Yesterday I was “in class” at the Washington State Housing Finance Commission learning about programs they have to offer Washington home buyers, including down payment assistance programs.
In order to obtain the down payment assistance, you must use a WSHFC first mortgage product, which includes:
- Home Advantage
- House Key Opportunity (limited funds – state bond). UPDATE: As of June 26, 2013 – this program is not being offered by the Commission. Home Advantage is still available.
The first mortgages may be FHA, USDA, VA or conventional mortgages with private mortgage insurance.
The down payment assistance (DPA) is in the form of a second mortgage that have specific criteria home buyers must meet to qualify.
- Home Advantage DPA has an income limit of $97,000 and does not have a “needs assessment”.
- Commissioned Second Mortgage works with the House Key Opportunity and is available to home buyers with special needs.
Home buyers interested in either program must attend a 5 hour class in order to qualify for these programs. While at class yesterday, I also received training to be a “Commission trained instructor”.
Watch for more details to follow soon!
A recent survey shows that those buying their first home are making up a smaller percentage of home buyers. From US News:
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, released last week, found that first-time home buyers were purchasing only 34.7 percent of the homes sold in October. That’s down from 37.1 percent in September, and is the lowest percentage ever recorded by the survey.
This decline surfaces as purchases of non-distressed homes—houses that are not in foreclosure—have increased dramatically in 2012. The report shows that the vast majority of the homes being sold are regular purchases—accounting for 64.7 percent of all houses sold in October, up from 55.7 percent in February. The increase is a sign of strength in the housing market, as fewer people are buying homes in foreclosure.
The article continues to speculate that part of the reason why first time home buyers are not participating as much as other buyers is partly due to tightening underwriting guidelines. If someone has been considering buying their first home, I highly recommend they get started with the pre-approval process early.
Lenders want to avoid another mortgage meltdown and want to make sure that borrowers qualify for the new mortgage. That might sound like a silly or obvious comment, however during the “subprime era” many home buyers did not qualify for the mortgage. Ultimately, underwriting guidelines are intended to measure a borrowers capability to repay the mortgage and to not have the home become a “distressed property”.
Underwriters are looking for a borrowers financial strengths and weaknesses when reviewing an application for a mortgage. In an article I wrote a few years ago, I compared this to a chair with each leg of a chair representing a financial quality that underwriters consider: credit, employment, income and assets.
First time home buyers don’t need to be discouraged, they do need to be prepared. Mortgage rates are extremely low making this a great opportunity to buy if one wants to.
I’ll share some tips on what first time home buyers can do in a follow-up post.
I’m working with a first time home buyer who’s interested in buying a home priced around $200,000 in the greater Seattle area. I thought I’d share some of the programs we have available at Mortgage Master Service Corporation that may help her accomplish her home buying goals.
If you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.
Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.
Here is a list of documents you may be required to provide in order to obtain a preapproval: