Pictured: Home in Shandon. Buyers should think about all the costs associated with buying and owning a home, as well as its investment value — not just the monthly payment — in deciding what type of loan makes the most sense. Photo by Katie English.
State Housing Authority. And some lenders offer down payment assistance programs. A knowledgeable lender should be able to help you navigate these programs. FT: Should I opt for a 15-year loan or a 30-year loan? What are the benefits and drawbacks of each? Jacob Crowder: Homebuyers need to opt for a payment they are comfortable with for the foreseeable future. The benefit of a 15-year mortgage is a lower interest rate. Fifteen-year rates are typically a half to three quarters of a point lower than a comparable 30-year rate. The drawback is that the overall payment is higher because of the shortened amortization period. FT: How much of a down payment will buyers
need? Can you borrow money for that? Crowder: There are programs that allow first-time homebuyers to borrow 100 percent of the purchase price, but they are restricted by either location and/ or income restrictions. The FHA program requires a 3.5 percent down payment and also allows for less-than-perfect credit with no income or location restrictions. Conventional financing requires 5 percent down. My Community, a Fannie Mae product, only requires 3 percent down. You cannot borrow money for a down payment. Most programs allow gifts from a relative that can be used as down payment. FT: What costs will be associated with my mortgage loan?
Crowder: The cost of closing a mortgage is broken into two categories, closing costs and prepaid costs. Closing costs include bank fees (zero to 2 percent of the loan amount depending on the rate), title insurance ($3.60 per thousand), attorney fees ($600-$1000), appraisal ($350-$400) and recording ($25$55). Pre-paid costs include the first year’s insurance premium, starting tax escrows, and prepaid interest. Another cost that doesn’t fit in either of these categories is inspections. FT: How do you negotiate the best interest rate?
important. Also, discuss different closing cost scenarios. Discount points are available on most products and lead to lower rates in return leads to lower monthly payments. FT: Can a person with bad credit buy a home? If so, what mortgage products are available?
Crowder: I recommend finding a loan officer you are comfortable with and discussing your options. Different programs have different rates so making sure you are in the right program for your specifications is very
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Crowder: To buy a house, your last 12 months’ credit history needs to be good. People with marginal credit can still buy homes. Most commonly a FHA product is used that allows for a less-than-perfect credit history.
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