Saving for a down payment
Buying a home can be costly.
For a conventional loan, lenders require a 10-20% down payment of the home’s purchase price. For a $200,000 home, that’s $20,000 – $40,000.
That’s a large amount.
Not many buyers can afford to pay such a large down payment, especially among first-time buyers.
If you have some savings and would like a mortgage with a lower down payment, the U.S. Department of Housing and Urban Development’s Federal Housing Administration offers a good alternative.
The FHA is an agency that insures mortgage loans for low-income earners so they can afford a property. Because of their financial situation, they are considered risky by most lenders. However, the FHA insures their loans just in case they fail to keep up with their commitments.
A cheaper housing solution
If you are a first-time buyer, and you haven’t enough savings to put down for a Charlotte NC home but would like to own one, a good option is to buy a HUD home.
A HUD home is a property owned by a bank due to foreclosure on an FHA loan program.
For some reason, the mortgage was not paid off, and the lender foreclosed it. HUD then paid the lender the rest of the mortgage and acquired the home, with the intent to sell it at a price lower than market value to help more people become homeowners.
To buy a HUD home, you can obtain financing through a bank or mortgage lender.
You don’t need to avail of an FHA loan program to buy a HUD home. However, if you choose to get an FHA loan program, it accepts low down payment for as little as 3.5%. For a $200,000 home, that’s only $7,000! It’s a massive difference from the $20,000 initial amount required by a conventional lender.
This program makes it perfect for those who can afford the monthly mortgage payments, but don’t have a considerable amount stashed in their savings. It is excellent for first-time buyers who have some savings but not enough to reach the 10% down payment conventional loans require.
Because HUD homes have lower market value compared to regular homes for sale in Charlotte, your money has significant buying power.The more significant your deposit is, the better for you. It means you’ll have a smaller mortgage., which translates to a lower monthly mortgage payment.
Also, lenders reward borrowers who give more substantial down payments with a lower interest rate, since you pose a lower risk. If you are a first-time buyeRand you haven’t enough savings to put down for a home for sale in Charlotte NC, but would like to own one, a good option is to buy a HUD home.
The role of your credit score
Your credit score plays a prominent role in determining how much down payment you’ll have for the FHA loan. You need to have a FICO score of 580 or higher to qualify for the 3.5% down payment. If your credit score is 500-579, you’ll need to put out 10% to be eligible for an FHA loan.
If you happen to have a credit score below 500, you are not qualified for an FHA loan.
HUD homes offer you the chance to find a home at a price that’s right for your budget.
Learn more about HUD homes. Call me, Nancy Braun, at (704) 997-3794.