If you’re a first-time home buyer (or haven’t owned real estate in the last three years), ask your loan officer about “The 97 Loan.” The down payment required is only 3%, and it’s a cheaper loan than FHA’s first-time home buyer loan.
Too often, banks and other lenders push the FHA loan, and here are two reasons why:
- The FHA loan is a big profit-maker for lenders.
- Loan officers think about the 5 percent down conventional loan and forget about The 97 for first-time buyers.
Compare FHA to “The 97”
FHA has an upfront mortgage insurance fee of 1.75 percent. The 97 has no upfront fee.
FHA’s monthly mortgage insurance fee lasts forever. The 97 Loan’s MI fee can get dropped when you have 20-22 percent equity.
FHA down payment is 3.5%. The 97 Loan is 3%.
How to Qualify for The 97 Conventional Loan
- Credit score must be at least 620. (Some lenders want 640.)
- Bankruptcy must be discharged for 24 months.
- Debt-to-income ratio should be 43% max, based on gross income (before deductions).
- Maximum loan amount is $424,100. Maximum price is $436,216.
Getting Together the Down Payment Money
The down payment money may be from your own verified funds or from family. Unverified cash is not allowed, meaning get that dough out of your safe into a bank account now.
You can also get creative and borrow money from your retirement account. Or, you can sell something like a car or motorbike, as long as you show the bill of sale and matching deposit receipt into your bank account.
Enough already! Pick up your phone. Tell your loan officer you want to get pre-approved, then call your real estate agent and go find a home to call your own!
If you’re in California or Washington, click here to reach me.
Please share this with others who want to become a home owner.
Do you know someone who would love to stop renting and buy their own home? A new study says 79% of Millenials want to buy a house. This study, by Bloomberg, goes on to tell them they can’t save fast enough for a down payment. I am here to tell you that I disagree! Why?
Bloomberg’s chart shows how many years it takes to save 20 percent down.
But who says you have to make a large down payment? It is not required.
Here are tips for buying a house when you can’t save fast enough for Bloomberg.
- If your credit score is 720+, take a 3% down conventional loan.
- If your credit score is 580 – 719, take a 3.5% down FHA loan.
- If your family is able to give you gift money for a down payment, you’re ready to go.
- If you are a U.S. Veteran, you may qualify for zero down.
- Use one of the many down payment assistant programs offered by your state. For example, I have a program in WA that will cover your down payment plus kick in a little for closing costs. You can earn up to $97,000/year to qualify. When you sell the house (or refinance), you pay back the down payment out of the proceeds. This is an interest-free loan to help more people enjoy home ownership.
If home values continue to increase next year as fast (or nearly as fast) as they did in 2015, you are better off buying now than waiting until you can save for a larger down payment.
Also consider that home owners receive the best and biggest tax deduction available. Typically, a home owner can deduct the interest portion of their payment plus property taxes. This lowers their tax bracket, potentially saving significant taxes. (Speak with your CPA for tax advice.)
If credit score is your barrier, then pick up a copy of Repair Your Credit Like the Pros here and get to work. Earlier today, I heard from a lovely young woman in Ohio who followed the book’s directions and is now applying for a home loan. Yes, credit repair works! But you must do it properly, like the credit attorneys and certified credit professionals.
What barrier is keeping you from the American Dream? Post a comment (see top of this article) or send me an email here. I promise to reply.