March 23, 2009

When Conventional Home Loans Just Don't Do the Trick...

Posted to Julie Sarton

When conventional home loans just don’t do the trick……

With credit tightening up these days and credit scores that we used to think were sufficient not looking so good, it’s important to know what alternatives to conventional financing for purchasing a home are available. I’ve been working with a young couple seeking their first home who, although at first didn’t think they could qualify for financing, have found that there are actually numerous options available for them.

With conventional financing today many banks require credit scores of 740 or more in order to lower the down payment. Many young couples have not established that high of a credit rating yet, and have not saved up a substantial down payment. With all the foreclosed properties on the market today, however, there are not only good deals to be had, but the financing available can be very creative and less demanding. Any type of financing can be used to purchase a home in a short sale or foreclosure situation.

A HUD-owned home is a home secured by FHA/VA financing that has been foreclosed on. Realtors can become qualified to show and submit offers on these homes, and will know where to find them. Not only are these homes affordable, they can be financed through FHA. The purchaser using FHA to finance a HUD-owned home will only be required to make a $100 down payment, and may receive a $1,000 or more sales allowance at closing to help cover closing costs, home repairs, etc.

Another special financing option is available for the purchase of Fannie Mae Real Estate Owned properties designated as a Home Path homes. First time home buyers can put as little as 3% down, and second home buyers and investors can put as little as 10% down with credit scores of 660 or better. There is no mortgage insurance and no appraisal necessary, since the value is based on contract price. Your realtor can also help you find these types of homes in your area.

Some other options are a USDA Guaranteed Rural Housing loan, which allows 100% financing with no mortgage insurance, and a Rehabilitation Loan for ‘fixer uppers’. All of these loans, of course, have conditions that can be complex. It’s important to meet with your lender, who can qualify you and determine which loan would fit your situation. Follow this pre-qualification process up with selecting a realtor who is familiar with your loan requirements and the process for finding the right homes, and who will work closely with your lender from purchase to closing. And don’t forget the first time home buyer’s $8,000 tax credit; if you have not owned a home for three years and close on one before December 1, 2009, you can benefit from this tax credit on 2009 taxes. My young buyers are delighted with the financing possibilities they have discovered are open to them, and are eager to find their first home this year.

Posted By: Julie Sarton

Leave a Comment