subject: Follow These Tips For Home Loan Financing [print this page] You will most likely need to find a good lender to work with. If your income and savings are making home buying a challenge, consider these options.
Investigate local, state, and national down payment assistance programs. These programs give loans or grants to cover all or part of your required down payment.
There are always programs available to help people get financing for a home. However, a lot of these programs are only temporary and they come and go quite quickly.
So if you find a program that works for you, you should get on the ball getting your information in so the loan can be written.
Get the seller to provide financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you do a mortgage.
Consider a shared-appreciation, or shared equity, arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and thus share in any appreciation when the home is sold.
The owner/occupant usually pays the mortgage, property taxes, and all maintenance costs, but all investors' names are usually on the mortgage. There are companies that can help you find such an investor if your family can't participate.
Get help from your family. Perhaps a family member will loan you money for the down payment and/or act as a cosigner for the mortgage. Lenders often like to have a cosigner if you have little credit history.
Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down payment.
And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.
See if you can qualify for a short-term second mortgage to give you the money to make a higher down payment. This may be possible if you have a good income and little other debt.
There are some choices you can make that will affect your loan. The first is the mortgage term. Mortgages are generally available at 15-, 20-, or 30-year terms.
The longer the term, the lower the monthly payment if the same amount is borrowed. However, you pay more interest overall if you borrow for a longer term.
Fixed or adjustable interest rates. A fixed rate allows you to lock in a low rate for as long as you hold the mortgage and is usually a good choice if interest rates are low.
An adjustable-rate mortgage (ARM) is designed so that interest rates will rise as interest rates increase; however they usually offer a lower rate in the first years of the mortgage. ARMs also usually have a limit as to how much the interest rate can be increased and how frequently they can be raised. ARMs are a good choice when interest rates are high or when you expect your income to grow significantly in the coming years.
Balloon mortgages offer very low interest rates for a short period of time - often three to seven years. Payments usually cover only the interest, so the principal owed is not reduced. However, this type of loan may be a good choice if you think you will sell your home in a few years.
Government-backed loans, sponsored by agencies such as the Federal Housing Administration or the U.S. Department of Veterans Affairs, offer special terms, including lower down payments or reduced interest rates - to qualified buyers.
Getting financed for a home can be a longer process than you might like, but you want to find someone you can work with easily and whom you trust. And you want to make sure you get the loan you need, not just the loan that makes the lender the most money.
There are lots of details to consider and lots of paperwork to pull together but in the long run, it can be very worth it to be patient so you can find yourself a homeowner.
