Buying a home is the dream of many of us. Nonetheless, not everyone can afford a mortgage, so most people have to keep on paying rent instead of getting their property to live in. Smart people who can’t accept to pay rent for the rest of their lives try to find solutions to afford to buy one. First-time homebuyer programs can be the perfect opportunity for young families who earn a stable income, yet can’t afford a regular mortgage.
The biggest advantage of such programs is that they accept people who don’t have enough savings for a large down payment. As the FHA insures lenders against the default of some of their clients, first-time homebuyers programs are accessible to those with lower credit score. Nonetheless, you’ll still need to have a minimum credit score of 580, to qualify for this type of loan. Since the market average is much higher, this is another advantage worth mentioning here.
The excellent interest rates offered by these programs make them very attractive to all people who haven’t bought a home within the past three tears, and who consider getting one. Even those who have enough savings to afford a large down payment prefer this type of program, thanks to the low-interest rates.
The main downside of first-time homebuyer loans is that they have much higher insurance rates than conventional mortgages or loans. Moreover, you need to pay this home insurance for the entire life of your loan. As this can easily add up to huge amounts, some people may be put off. Nonetheless, the attractive interest rates make the monthly payments of such loans align with other options on the market, so you aren’t going to pay a higher than average mortgage rate.
The other downside is that you can’t purchase luxury properties, as such loans are capped. The loan limit depends on the median income in your desired area, so you should check with your real estate agent the maximum amount you can borrow.
Refinancing such loans can also be a problem, so you should make sure you understand all terms and conditions before applying for one. Also, if you intend to sell this home soon after buying it, you may lose some of the benefits of the program. Some programs ask their beneficiaries to live in this home as their primary residence. If you intend to buy a home to rent it, you may not have access to all the benefits of an FHA loan.
First-time loans are perfect for young people or families who want to purchase their home to live in for a very long time. The relatively low-interest rates and the small down payment can help lots of people access a mortgage. Taking into consideration that the monthly rate may be even higher than the mortgage payment, buying a property can be a smarter decision than renting one.
If you want to know more, you should contact some lenders and ask them to provide you a price quotation. This is how you can find out what type of property you’re going to be able to buy, should you decide to go for a first time homebuyer program. If it suits your needs, you should go ahead and find your dream home. If you need something more expensive, you’ll have to save more money, to afford a larger down payment. Such programs are useful, but they have their limitations regarding prices and refinancing options. It is up to you to weigh all these factors, to take the best decision.