First Time Home Buyer Programs, how can you find which one is best for you?When you start looking around, first time home buyer programs are plentiful. With so many choices, how you know which program is best for you? Loan Programs Fixed Rate Mortgages Fixed-rate mortgages are the most basic and the most popular mortgage product. Simply put, borrowers are guaranteed a stable, unchanging interest rate for the life of the loan, which can be 10, 15, 20, 25 or 30 years. The payment itself is a combination of principal, interest and escrow amounts (if selected) to pay for the property taxes and insurance, such as (homeowners, flood, mortgage, etc. While this one of the many first time home buyer programs, it does not always work out for many first time home buyers because they may face certain issues that need to be resolved. Adjustable Rate Mortgages (ARM)
Adjustable Rate Mortgages can serve as one of the first time home buyer programs. However, it's not always the best. They are loans where borrowers are given an introductory rate for a specific period of time, for example, one month to 10 years, depending on the product. This rate is lower than a traditional 30-year fixed-rate mortgage, and in some cases, the difference is significant. Upon expiration of the introductory period, a borrower's interest rate will adjust on the "change date" on a regular basis for the remainder of the life of the loan. The new interest rate is based on a combination of a specific index - a variable economic indicator - and a margin percentage, which is predetermined at closing. Adjustable rate mortgages can experience a great deal of payment volatility depending on market conditions. However, these mortgages also can be an excellent option if borrowers do not plan on living in a property for a long time or need a low rate when they are just starting out. Some products have adjustable rate mortgage options including the ability of converting to a fixed-rate loan known as a Convertible ARM. Personally, I do not prefer this as one of my first time home buyer programs because when it does adjust, interest rates may jump 2%-3%. Zero Down Home Mortgages
There are some mortgages available that allow borrowers to purchase or refinance a home without putting any money down at closing. These products may emphasize lower credit scores, provide entry into selected housing markets or allow financial concessions by the seller. All zero-down products provide 100% financing for individuals who do not have sufficient funds for a traditional down payment. Again, although this is the choice by many as one of their first time home buyer programs, you should be aware, this may not best your best choice personally. Jumbo Loans
For loans that exceed the "conforming" loan size limits (currently at $417,300, but adjusted yearly to reflect changes in the average sales price of a single-family house), there are products that have both fixed-rate and adjustable rates available. Loan size can be as high as $2 million. Unless you have a rich uncle, lenders do not offer these as first time home buyer programs because of the size of the loans. Home Equity Lines of Credit (HELOC)
A home equity line of credit is a revolving "checkbook" loan that uses equity in a property as collateral. Borrowers can write checks for everything from home improvements to vacations to credit card balances. Borrowers also have the option of making interest-only payments during the 10-year life of the loan (remaining principal due at maturity). Since the interest rate is calculated at a set margin above the prime rate, a home equity line of credit is considered a cost-effective alternative to credit cards for financing larger purchases. Second Mortgages
Second mortgages, which have a term of five to 30 years, utilize the remaining equity in a property that a "first" mortgage is not using as collateral. Due to their increased risk, lenders traditionally charge higher interest rates on this product. Second mortgages are useful for paying off debt, for avoiding higher rates associated with jumbo loans, or for eliminating private mortgage insurance when used in conjunction with a "first" mortgage that represents 80% or less of the value of the property. FHA/VA Loans
Federal Housing Administration (FHA) and Veterans Administration (VA) loans are government sponsored and guaranteed loans with very flexible qualification requirements. VA loans are specifically designed for eligible military personnel, veterans, and widows or widowers of veterans. FHA/VA loans provide an affordable means of buying a home by lowering some of the costs of the mortgage. Many
first time home buyer programs
can be found with FHA and VA.
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