The Truth and Myths about Home Buyer Programs
Hello everyone,
Today we're going to talk about an often misunderstood topic. Home Buyer Programs. Most people out there have heard about the so called "First Time Home Buyer Programs". This becomes ambiguous when you start asking what they are. I am a Realtor in Washington and also licensed to do loans. Before I was licensed to do loans I had myself heard of such programs and was asked many times by both buyers and their parents what first time home buyer programs they qualify for. Lets talk about what this really is because I think there is great confusion of what this means.It's kinda like when I tried a multi level marketing program many years ago. People always asked is it Amway?, I would reply no and would ask them what Amway was and many of them didn't really know but they heard it was bad. This always reminds me of the home buyer programs because when I asked what they meant they really didn't know other than having heard there was something for first time buyers. As a Realtor I figured out there wasn't necessarily these programs as people thought but what they usually were referring to was a couple of different things.
There is "Government Grant Money". Which is usually a certain amount of money put aside to help buyers buy a home. An example of this is snap money. Sometimes this is regulated by certain criteria of the borrower and sometimes they can only use it for homes in certain areas also known as revitalization. There are in this one and many others "strings attached" Many times the buyer must occupy the property, sometimes they are not allowed to rent any portion of it out, sometimes they must stay there 5 or ten years of be forced to pay back some or all of the money if they sell it before then. Each program is a little different and for the most part the money must be applied for and it comes out every so often and when it runs out the program is on hold until another funding of money into the pool. These programs can be OK but with many lenders trying to loan money and good negotiation on your Realtors part, these programs don't have to be used. One of the drawbacks to these is they can limit you to what houses you can purchase and the drawbacks of having to stay at a home when it's your first home can be a problem based on the fact that most people will upgrade within 1-3 years of the purchase of their first home.
Next is the lender specific programs. These are offered by different lenders and may require you to take first time home buyer classes that could delay the process of getting your home and loan. Many like the others have "strings attached and penalties if you sell too soon. Most only give you help with your closing costs or down payment. But with the popularity of 80/20 loans and 100% financing for people with average credit, they are being used less and less. Plus with interest rates at an all time low buyers can quite easily buy now with little or no money down.
Many people's parents also confuse the first time home buyer programs with simply FHA financing which lets you come in with only 3% down. An FHA loan is a federally backed loan which means the government has guaranteed the loan if the buyer defaults and with less risk to the lender they require less down compared to the conventional 5-10% down method popular at the time of the parents buying. So I have found that many times they are simply referring to a low money down loan. It's not actually a program, it's a type of loan. Many times there are other programs you can use like"Neighborhood Gold, and Others that will donate up to 7% to the buyer if the seller pays a fee or contributes 1%. How this works is since your down payment can't come from the seller but can come from a non profit organization. These companies take a donation and then donate to you the money. So if a seller contributes 7% they take 1% and give you a donation of 6%. Each program operates a little differently but that is the basic concept. Some people negotiate a higher price on the home to make up for this so the seller doesn't have to eat the whole cost, so the 7% can come off the list price or you can offer 7% more for the home and ask them to participate knowing that their net will be similar as a regular offer. The only catch there is the home must be able to appraise for that higher amount.
So there you go, the bottom line is, many home buyer programs can be outperformed with no penalties by a Realtor who knows how to structure both the loan and negotiate the closing costs, but if a person happens to have time, want to buy in a certain area or have a penalty then some of the other programs may make sense. not all real estate agents are familiar with all the different programs so you have to ask around.That being said, one of the reasons I decided to do loans is to provide more option s to my buyers and not have to stick them in a program that limits their home choices or penalizes them if they want to sell. My suggestion is just find a Realtor who knows the other ways to get you into the home with little or no money down. I'll be posting a blog on this subject soon. Until then, visit our website and check out the resources there www.teamquintana.com, read My Blog for other great tips, or call us or email us at ross@teamquintana.com and let us get together with you and show you our free buyer services and help you in your next purchase. Thanks Again.
Ross Quintana
Team Quintana Real Estate - MJ McAdams Realty
509-362-1966