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Help for first-time homebuyers

by Gremlyn Bradley-Waddell on Feb 6, 2015

Hoping to start out the new year in a new home?

First-time homebuyers — as well as many of those who’ve satisfied the appropriate waiting period after a short sale or foreclosure — can breathe a little easier. Not only will they benefit when mortgage insurance premiums on FHA (Federal Housing Administration) loans are reduced — an effort announced by President Obama last month during his stop in Phoenix — but several programs designed to make mortgages more affordable are currently in effect.

A good ‘kick-start’

“The FHA mortgage insurance has been increasing for the past five years and that has made it difficult for people to qualify for a loan,” said Christopher Gilbert, branch manager for the North Peoria branch of V.I.P. Mortgage Inc. “While it’s been a great couple of years for the housing market, this reduction will be a good kick-start for people to get back into it.”

According to the White House, new homebuyers can expect to pay roughly $900 less per year thanks to the reduction. And while that’s certainly helpful, that’s not all there is. A variety of down-payment assistance programs are also available, according to Jason Servais, assistant vice president and mortgage banker at On Q Financial Inc. in Peoria.

Unfortunately, he added, many of these beneficial programs aren’t promoted that well, so the onus is on homebuyers to do their due diligence and really be on the lookout for help. That said, Servais and Gilbert pointed to a few programs that homebuyers might want to consider, namely:

Home in Five. Sponsored by the City of Phoenix and applicable to properties in Maricopa County, this program has a higher interest rate than current rates — which, at the time of this writing, was 4.375 percent in contrast to the standard FHA rate of 3.5 to 4 percent — and features additional charges and fees. “But when you break it down, it makes sense,” in most cases, to use it, Servais said, noting that “it’s still a phenomenal rate.” Applicants are not required to be first-time homebuyers and the annual income limit is $88,340, compared to other programs that have limits from $40,000 to $60,000.

Half Percent Down. This FHA program is a combination of two mortgages, Servais said. The buyer puts a half-percent down-payment on a 30-year, fixed-rate mortgage and that’s combined with a second, 15-year fixed-rate mortgage of 3 percent. “The nice thing is that half-percent can come from your own funds or it can be a gift from family,” he said. The thing you have to remember is that you have two payments — two mortgages — and that can be a challenge to deal with, he added. This program also isn’t limited to first-time buyers.

Home Plus Program. This program, offered by the Arizona Housing Finance Authority, is essentially a 4-percent grant for a conventional loan. 

Buyers do not need to be first-time owners, but there are credit requirements, Servais, of On Q Financial, said.

Plan ahead

Gilbert, of V.I.P. Mortgage, said the best advice he can offer buyers is to plan ahead, even if that means six months or a year before you plan to start looking for a home. Down-payment assistance programs often have extra requirements such as homebuyer education counseling, he said, and too many people go backwards through the process by finding the home they want first. Both he and Servais said a few other programs worth a look include:

HUD’s Good Neighbor Next Door program. Professionals such as police officers, firefighters, Emergency Medical Technicians (EMTs) and K-12 school teachers may apply to this program, which offers 50 percent off the list price of select rehabbed properties, Gilbert said.

VA Loan. This offers the best interest rate, no money down and, if you ask, you might get the seller to pay the closing costs. What’s more, there’s no monthly mortgage insurance. “I go above and beyond to make sure (a qualified veteran) gets into one of these loans,” Gilbert said.

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