At the moment, it could be a somewhat frustrating time if you are a first time home buyer in the Boulder County or Denver metro area. With more stories about record high home prices emerging in the Denver Post again this week, not to mention stories from neighbors and friends about buyers getting beat out against other offers, even when prospective buyers offer thousands of dollars over asking price, are certainly enough to create a bit of a let down. Since so many stories surfacing today are about this seller's market in our part of Colorado, I thought it would be a good idea to present a few ideas about "creative financing for potential home buyers. I am writing this blog article with the first time home buyer in mind, however, these potential channels of financing are available to most folks who might want to explore options outside of what a conventional mortgage lender offers.
1. Affordable Loan Solution Plan - According to a recent article in the Washington Post there is a newly launched loan option, called the Affordable Loan Solution plan. This new plan for home buyers allows for down payments as low as 3% (which is $12,000 on a $400,000 home). Additionally, buyers don't need a minimum cash reserve. The loan amounts are as high as $417,000 and the big perk is there are no charges for traditional private mortgage insurance, which buyers find in other low-down-payment mortgages. Mortgage insurance (known as both PMI and MIP) can sometimes add hundreds of dollars a month to buyers’ costs and make ownership unaffordable. For applicants with poor credit, the program allows for consideration of non-traditional forms of credit history, such as monthly rent payments, utility bills, etc. There are a slew of additional reasons to consider this new program and I encourage you to read more here.
2. Neighborhood Assistance Corporation of America (NACA) - This program, which was started in 1988, was a result of activists pursuing a movement against predatory and discriminatory lenders, which ultimately left the organization with a large fund from successful lawsuits. As a result NACA was formed to continue to work to fund billions of mortgages in the US. The NACA mortgage allows its members to purchase their homes with below-market interest rates, regardless of buyer's credit scores. As of today, the NACA published interest rate was 3.375% for a 30 year loan and 2.75% for 15 year loans. Here is a summary of benefits to the borrower:
- no down payment
- no closing costs
- no fees
- no requirement for perfect credit
- and at a below-market interest rate
NACA uses character-based lending criteria that takes each member’s circumstances into account to determine whether they are ready for home ownership and what they can afford. This is in contrast to risk-based pricing where people are often given loans they cannot afford while brokers and others make tremendous fees and profits. Learn more about NACA here.
3. FHA 203K Loans - These are loans that enable home buyers (as well as home owners) to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage. When buying a house that needs repair, home buyers may take advantage of the FHA 203K to fiance a purchase. If you are thinking of getting a mortgage loan for a fixer-upper, then you may want to read about the benefits of a FHA 203K loan to help you save a tidy sum. According to Zillow, "Often the loan will also include up to 20% “contingency reserve” so that you will have the funds to complete the remodel in the event it ends up costing more than the estimates suggested and/or a provision that gives you up to about six months of mortgage payments so you can live elsewhere while you’re remodeling, but still pay the mortgage payments on the new home."
At Louisville Realty Associates, we have the experience, energy and depth of knowledge to help you list your home for the best price. You can reach us anytime at firstname.lastname@example.org.
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