Loan officers who work with first time home buyer programs often speak to potential home buyers on a daily basis. These prospective home buyers are in search of programs that can assist them with the necessary finances for making home purchases. This article seeks to differentiate between the truths and the myths of the programs while offering guidance regarding suitable candidates for the programs.
To clear things up, it is important to remember that these programs are not meant for people with bad payment histories. Moreover, the programs are not suited for buyers with the resources for buying a home. Lastly, it is unlikely for a prospective buyer to acquire a home using this program without actually spending money for the transaction.
Majority of the programs are funded using block grants provided by the U.S. Department of Housing and Urban Development. Consequently, they are built for both the low and moderate income earners wishing to buy homes. However, income restrictions vary from one state to another. Usually, the income limitations are higher especially if a buyer makes a purchase in a revitalization zone.
While some home buyer programs may indicate that buyers can purchase a home with $500 or less but in reality, the purchase typically costs between $1,200 and $1,600 or more just to be able to qualify for assistance. Buyers are expected to have adequate resources for the deposit, home inspection as well as the cost for doing an appraisal.
It is quite misleading to assume that borrowers with bad credit histories can buy a home. Although this was possible only a couple of years ago, almost all programs available today make it a mandatory requirement for participants to have a good credit score. The bulk of the loans are made available by lenders in the private sector and not the program providers. As a result, the lenders expose themselves to risk by making their loans uninsurable by private or government mortgage insurers if credit underwriting procedures are not adhered to.
The right candidate should have some funds for investing in the purchase and participants are also expected to have good credit scores. It is highly unlikely for such buyers to default. To fund the program without any financial strains, a buyer should ideally be left with 55% or more of his or her gross salary even after making the debt payments.
First time home buyer programs are an excellent option that can easily act as a supplement for a creditworthy buyer with the dream of owning a home. Despite this, no government agency or lender wants to distribute limited taxpayer resources to borrowers who are yet to demonstrate financial responsibility. The program is designed specifically for people buying new homes. This is an important aspect as it creates jobs for the locals, encourages new development and creates an enabling environment for the micro economy to become better. Without the programs, only a small market would exist for the new homes. If you qualify for the program, you can go ahead and make the best of it.