Written By: Glenn Michaels, Op-Ed Writer
If you are thinking of buying a home in the near or distant future then you better start saving your money to buy that home. You need money for the down payment and for the closing.
There are many different properties for sale as there are different buyers/borrowers out there buying the different properties. There are different mortgage programs that require certain type of borrowers and all different down payments.
If a borrower is an honorably discharged veteran of the United States Military or an active duty member of the United States Military the borrower if eligible can purchase a home for no money down. However the borrower needs money for the closing. The veteran and/or active military person can obtain a sales concession of 4% of the purchase price. In some areas of the country because of lower closing costs, 4% sales concession the borrower may need very little funds. In addition family members are permitted to furnish a gift to assist the veteran or active duty member to buy that home. In this case the borrower did not have to come up with money and the borrower did not have to save money in this case using a guaranteed Veterans Administration (VA) mortgage the borrower did not have to save money to buy a home.
If a borrower wants to purchase a home using the United States Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) insured program to purchase a home the borrower needs at least 3 ½ percent of the sales price to purchase the home. The 3 ½% does not have to be the borrowers own funds. The borrower can receive a sales concession of 6% to assist in paying the closing costs. The minimum 3 ½% required down payment does not even have to be the borrowers own funds. The borrower can receive a gift, grant and a secured loan to buy the home. In addition the borrower can sell an asset or use their own funds to purchase their home. Depending on the purchase price, state’s closing costs, sales concession, and the amount of the gift/grant the borrower may need little or no money to purchase the home.
If a property is situated in an area that a USDA mortgage loan can be done. The borrower may be eligible for 100% financing or no money down. The borrower’s sales concession and family member gifts the borrower obtaining a USDA mortgage may not need any of his own funds to purchase the home.
The conventional mortgage market also requires a minimum of 3% down and private mortgage insurance (PMI). Borrowers can also receive a sales concession, gifts and grants to buy the home. The statement that you should start saving now to buy a home may not be an issue in some cases.
Today, most mortgage loan applications are underwritten by an Automated Underwriting System (AUS) and most AUS programs tend to approved borrowers easier when they have more liquidity. Some borrowers want a lower monthly payment by putting more money down. For these borrowers it pays to start saving money now.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
