Friday, February 29, 2008

Is This a Good Time to Buy a Home?

According to this article it’s a very bad time for young people to buy a home. I’m not sure under what investment strategy it’s considered best to buy when prices are high rather than low, but I’ll just let that absurd tidbit in this article go for now.

What I do want to address is the ridiculous notion that first time home buyers have to put 10% down. Entirely untrue. Here’s a short list of options for first time home buyers with NO down payment. As in ZERO down payment.

1. FHA – FHA loans require a 3% down payment. However, HUD’s attempt to outlaw the gifting of the down payment from “down payment assistance” programs has thus far been unsuccessful. On an FHA loan, a first time buyer can use this gift program for the down payment, and ask the seller to pay all of the closing costs (especially in this market full of desperate sellers). Resulting in zero investment by the buyer. Alternatively, if you’re lucky enough to be related to someone who wants to give you money, you can receive a gift from family for the entire 3% down and closing costs.

2. FannieMae Flex 100 – This is a 0 down loan with mortgage insurance. The seller can pay all of the closing costs or the buyer can receive a gift from family to cover the closing costs.

3. FannieMae My Community – This is a zero down loan also with mortgage insurance. The closing costs can be paid by the seller or by a gift from family; however, on this program the buyer does need to have $500 of his/her own money. (Income Limits apply for this program.)

4. VA – Veterans, including reservists, are eligible for VA loans which require zero down payment. The closing costs can be paid by the seller or by a gift from a family member.

5. Oregon State Bond – For this program the buyer cannot have owned a home for the past three years and income limits apply. Under this program the state of Oregon offers first time buyers a below market rate and also pays 3% of the loan amount toward the buyer’s down payment. It’s done in conjunction with either a Fannie Mae or an FHA loan and follows the credit and qualifying guidelines of whichever program is being used.

I don’t know where some of these people get their information, but it’s really not anymore difficult to get a loan today than it was ten years ago generally speaking. It is tough out there for those who want to become billionaires overnight by investing in real estate, without working, having any money to invest or paying their bills. But for first time home buyers - there's no time like the present to start investing in your future.

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I think not only could this be a good time to by a house, but it may be the best time in years.

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