Education is a major part of the home buying experience. The more education first time home buyers dive into, the smoother the process typically goes. You intuitively know this. You're already thinking about next year, and wondering what it will take to buy a home in 2014.
Maybe you've heard that interest rates are low right now, but moving up soon. Maybe you've heard about changes coming to the mortgage world in 2014. You've probably heard terms like "buyer's market" and "seller's market" thrown around in the news. Whatever the case, buying a home is definitely on your radar right now.
So, what exactly do you need to know in order to become a home buyer in 2014? First, it helps to know your 2014 first time home buyer options when it comes to financing. Understanding some of your mortgage loan options can help you focus your energies on what kind of home you're going to look for when house hunting. Below is a list of some of the options for financing a home in 2014.
USDA Rural Development
Rural Development is a home buying option from the U.S. Department of Agriculture - or USDA. It's one of the only mortgage options that doesn't require a cash down payment. Yes...a zero down mortgage option really does exist! Of course, there is a catch. The home must qualify based on location. You'll have to find a home that's not located in a city, but that doesn't mean you have to live on a farm. In fact, the video below shows that you might be living in an area that qualifies for USDA Rural Development financing even though it's in a neighborhood!
VA Mortgage Loan
Another 100% financing option is the VA Mortgage Loan, or VA Loan. This is obviously for military veterans who qualify, but it's another option you may not have considered. If you're in the military and you've moved around a lot, you're probably used to living on-base or in an apartment. When you're ready to buy a home, you can do so with the VA guaranteed loan.
Benefits to using the VA Loan to buy your home in 2014 can include:
- Equal opportunity for all qualified Veterans to obtain a VA loan
- No down payment required*
- No mortgage insurance**
- One time VA funding fee can be included in the loan
- VA staff dedicated to assisting Veterans who become delinquent on their loan
Learn more with this VA mortgage loan fact sheet.
Your standard FHA Loan is the 203(b). While the Federal Housing Administration (FHA) does not actually issue mortgage loans it does provide mortgage insurance to lenders like AmeriFirst Home Mortgage. Home buyers like FHA loans because they have more liberal qualification requirements. Credit score requirements tend to be a bit lower than other mortgage loan programs. Debt-to-income ratios differ from other options – the general rule for FHA is that your house payment should not exceed 31% of your income. Adding your house payment to the rest of your debt should keep your total debt at or below 43% of your income.
In addition, they typically have a lower down payment requirement (as low as 3.5%), lower monthly insurance premiums and often have lower closing costs. This makes an FHA loan a very attractive loan for the first time home buyer, and for families with low-to-moderate income levels.
HomePath is Fannie Mae's answer to owning foreclosed homes. Because Fannie Mae isn't in the business of managing housing stock, it sells these properties (often priced quite affordably) with benefits like: no appraisal needed, no mortgage insurance, low down payment of 5% and more. Investors can also use a HomePath Mortgage to buy investment homes as well.
A secondary option to the HomePath Mortgage is HomePath Renovation. When a HomePath-eligible home needs work, you can use this option to finance the purchase and remodeling of the house. The one loan amount includes both the funds for the purchase and renovation - up to 35% of the as completed value, no more than $35,000.
Full FHA 203k
The Full FHA 203k (or Standard 203k) is an all-in-one loan used when homes need major rehabilitation. the repairs needed could be structural, involve landscaping or the renovation costs exceed $35,000. There must be a minimum of $5,000 worth of repairs, and again, the borrower must occupy the property. You may also roll in up to six months of mortgage payments if the HUD consultant determines you need to be displaced from the home during the repairs.
The 203k Streamline is an all-in-one loan used for homes that need minor repairs. It allows borrowers to finance the purchase of an existing home and make improvements or upgrades up to $35,000 before move-in. There are no minimum repair costs and the borrower must occupy the property.
Read more about the diference: 203k Streamline vs Full 203k
When you use an FHA 203k loan and make specific energy-efficient upgrades to thew house, you could end up with AmeriFirst paying part of your closing costs. Using the PowerSaver Grant could net you around $2,000 for an average home and "green" upgrades. Some of the work eligible for PowerSave include window upgrades with Energy Star-rated models, an Energy Star furnace, solar panels and more. It's a great way to "go green" and get some green at the closing table.
How Do I Get Started to Become a 2014 First Time Home Buyer?
Mortgage Pre-Approval. One of the first things you should do is talk to a mortgage consultant. Let them know you're just starting the educational process, and see where your finances stand. If you let your consultant pull your credit score, you can see whether you would qualify for a mortgage. If your FICO score is a little shy, your mortgage consultant can help get you on track and get that score mortgage-ready.
Another benefit to talking to a professional about your finances is that you'll have a good idea on what kind of homes you should eventually look for. Your budget - how much house you can afford - will help you focus your efforts on homes within reach. It's heart-breaking to go house hunting without mortgage pre-approval, only to find the house you love and realize you can't get approved for the price. Getting pre-approved will help you avoid this disappointment.
Start Saving. You may end up with a 100% financing mortgage loan option, or maybe not. Either way, it's likely you'll at least need some cash at the closing table. Start saving money now to get prepared. Make sure you're putting it in your bank account (or credit union). Lenders love a paper trail. It's likely you'll need anywhere from a couple hundred dollars up to a few thousand. Start saving in smaller amounts immediately, and it will be a little easier to handle.
Remember: Get started today to become a 2014 home buyer!
(creative commons photo: 2014 calendar)