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How to buy a home with no money down!
First Time Home Buyer Loan Programs
Many first time home buyer programs offer 0-3% down payment options with approved credit. Some zero down first homebuyer programs allow you to roll in closing costs so that you can go to the closing table without writing a check! Most 3% down programs allow the down payment to be in the form of a 100% gift. Many people believe that you need very low income to qualify for these programs. Not true! There are many first time home buyer loan programs to assist first time home buyers with different credit, income, asset, and debt situations. These programs are designed for individuals who have little or no money for a down payment.
Don't put off buying due to a lack of funds since there are many flexible loan programs to meet your financial situation.
California Housing Finance Agency
The advantages to obtaining a CHFA loan are:
- Lower interest rates generally available
- Minimum down payment of 3-5%
- There is no down payment in certain counties when using the 100% Loan Program
Available through CHFA are two Down Payment Assistance Programs. These are designed to assist the first-time homebuyer with down payment and/or closing costs.
100% Loan Program (CHAP)
This Program is designed to provide up to 100% of the financing needs of prospective eligible first-time homebuyers. It generally consists of a standard 97% CHFA fixed-rate 30- year mortgage (at CHFA's published below-market interest rate at the time the loan is reserved) and a 3% CHFA down payment assistance second mortgage, which is also called a "sleeping" second. Borrowers can use additional downpayment funds; however, the total maximum loan(s)-to-value cannot exceed 100% and CHFA's CHAP mortgage must be second only to the CHFA first and senior to other subordinate financing. The second mortgage is offered for 30 years at 5% simple interest. All payments are deferred on this second mortgage until one of the following happens: the CHFA first mortgage becomes due and payable; the first mortgage is paid in full or refinanced; or, the property is sold.
Affordable Housing Partnership Program (AHPP)
The Affordable Housing Partnership Program (AHPP) is a joint effort by CHFA and cities, counties, redevelopment agencies and housing authorities whereby a deferred payment subordinate loan from a locality is utilized by the first-time homebuyer to assist them with down payment and/or closing costs.
First-time homebuyers who obtain direct financial assistance from a local government agency or locality with their down payment and/or closing costs, may be able to obtain a CHFA home loan with an interest rate that is below CHFA's standard rate. Subject to income, sales price and property requirements, the loans only require a low down payment.
The Nehemiah Program® provides a gift of 1% to 6% of the contract sales price towards down payment and closing costs on your new home.
What is the Nehemiah Program®?
The Nehemiah Program® exists for a very simple purpose: helping people become homeowners. Established by the Nehemiah Corporation of California, The Nehemiah Program® provides gift funds for down payment and closing costs to qualified buyers using an eligible loan program, such as FHA. Gift funds of 1% to 6% of the contract sales price can be requested, depending on the particular needs of the buyer. Given the unique structure of The Nehemiah Program®, individuals and families can often move into their new home with zero cash out of pocket!
- NO Repayment of Gift Funds
- First Time and Repeat Home Purchases
- NO Income or Asset Limits
- NO Geographical Restrictions
As the original and most innovative down payment assistance program, The Nehemiah Program® offers the industry's lowest required seller's contribution. Seller contributions are equal to the buyer's gift amount plus a small processing fee at the close of escrow. Often the buyer, lender or seller can pay the processing fee. Contributions and fees are reinvested for future gift funds and community development programs across the country.
10 Steps to Home Ownership
Purchasing a home is an important decision, especially so for a first time buyer who doesn't have the knowledge and experience in buying real estate. My goal is to provide first timers with home buying tools and information, so that they can determine if home ownership is right for them.
Here is a summary of the steps that you will take from your home search to closing. If you are a first-time home buyer, don't be overwhelmed by the number of items listed or their complexity. As your real estate agent, I will guide you through this process. Many of the tasks are handled directly by me, the escrow company or the loan officer. I will instruct you as to exactly what you must do and will answer any questions that you might have. Don't forget, I've gone through these procedures many times before.
NOTE: All dollar figures listed in this section are estimates and will vary due to many factors.
- Using the loan and pre-qualification functions in the software, determine the price range of the home that you can afford. I will show you houses in this range in the communities that you would like to live in. For the most part, you should count on spending two to four weeks looking at homes with your real estate agent. This will give you enough time to look at plenty of homes and make your decision. If you take longer than a month, you risk the chance of losing a home that you would have liked to make an offer on, and you'll have to start the process again.
During this time period, it is also a good idea to get "pre-approved" for a loan. This is different than a pre-qualification. The bank or mortgage company actually does a credit check for a pre-approval. Having a pre-approved loan gives you an advantage when making an offer in step 2. I can recommend a loan officer if you don't already have one.
- When you find a home that you want to purchase, the next thing you do is make a bid through your real estate agent. Your agent will provide you with a standard residential sales contract.
The sales contract will most likely contain some contingencies on riders attached to the contract. Examples of some contingencies are: your obtaining financing for a specified rate and term, selling your current home, and obtaining a satisfactory (to you) home inspection. Other items maybe included.
This offer to purchase a home will be accompanied by earnest money of $1,000 or more, depending on the price of the home. This indicates to the seller that you are making a serious offer. The earnest money is normally in the form of a check made out to the Broker (not the seller). It is deposited in an escrow account and will be applied to your down payment. If the sale is not finalized for a reason beyond your control (i.e. due to one of the contingencies), the earnest money will be returned to you. Subsequent offers and counter offers may take place until all terms are agreed upon by both parties.
- Have the home inspected by a professional, bonded inspector. (NOTE: The buyer normally pays for the home inspection - it will run somewhere in the area of $200 - $500.) The home inspection usually takes place within five days after signing the contract. If there are any major flaws in the home, they can be dealt with before you apply for the mortgage. If these issues cannot be dealt with to the satisfaction of the buyer, your contract should allow you to back out at this time.
- Apply for a mortgage. You will probably have to pay a loan application fee of $100 to $300. Some lenders also charge you prepaid points. (One point refers to 1% of the loan amount. Points are paid to the lender or mortgage company to cover their cost for the up front processing of the loan.) You may decide to "lock in" the rate at this time, or the lender may allow you to do it at a later point in time. (If you have been pre-approved for a loan, some of the steps in this process will have already been completed.)
When you apply for a mortgage, what are some of the items that are needed? (These may vary depending on the lender.)
- Social Security cards and driver licenses
- Residence addresses for the past two to five years
- Your landlord's name and address
- Names and addresses of each employer (past two to five years)
- Your most recent pay stubs
- Two years signed tax returns and W2s
- Names, addresses, account numbers and balances of all checking, savings, credit cards and installment loans
- Two most recent bank statements on all accounts
- Information on any stocks or bonds you own
- Details of all real estate owned
- Copy of fully executed sales contract, riders and listing sheet for your current home (if applicable)
- Divorce decree & child support agreements
- Application fee
- 5. You will receive a "good faith" estimate of the closing costs from the lender. This is called a "RESPA Statement." It includes the costs for: points, appraisal, title search, title insurance, survey, recording of deeds, and the bank's attorney fees. Some of these items may be included in the points that they charge.
- 6. At this time, there are several other items that may need to be done before the lender gives final approval to the mortgage title, even though the title company stated it was clear.
o Buyer's Title Insurance - This covers you, the buyer, in the event that the title is not clear. This is usually optional, but recommended.
o Private Mortgage Insurance - Again, this is something that most lenders require if your down payment is less than 20 percent of the purchase price. It is a protection for the lender in case you default on the loan.
o Homeowner's Insurance - This is an insurance policy that covers the cost of repairing or rebuilding your home in the event of a natural disaster. Obviously, this is beneficial to both you and the lender. This is something that you will shop around for on your own. You can start with your auto insurance company. Your Realtor may also have some suggestions.
With the exception of the homeowner's insurance, all of the above costs, plus any additional ones such as the appraisal, survey, recording of deeds and the bank's attorney fees will be included in the RESPA provided by the lender. The amount of points that you will have to pay depends on the lender's policies, the amount of your down payment, the term and the amount of the mortgage.
This means that you should count on having enough cash available to cover the above cost besides the amount of your down payment and the amount of points paid to the lender. The down payment is usually a minimum of 5 percent to 10 percent of the selling price.
- 7. If your mortgage is approved, the lender will send you a letter of commitment. If the following information is not provided, you will request an exact accounting of the closing or settlement costs and the required documents that you will need to bring to the closing.
- 8. All of the parties will agree on a closing date. For the closing, here is a list of some of the items that the three parties are responsible to bring.
The lender: RESPA, Truth in Lending Disclosure Statement, the mortgage, the mortgage note, application for any escrow accounts required for the buyer, and the check for the seller.
The seller: property deed, final utility bills, final tax bills, any documents required to clear the title, and keys to the house.
The buyer: cashier's check for the remainder of the down payment, plus the balance due for any other payments (you will be informed of the amount), any documents required by the lender, you may need your check book for small dollar amounts.
- 9. You will select a walk-through date. This is your opportunity to inspect the home one last time before closing. It is usually scheduled a day or two before the closing date.
- 10. CONGRATULATIONS! Closing day has arrived. After signing numerous documents and taking care of final payments, you will become the proud owners of your own home.
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