Are you a looking to Purchase a home but need assistance with the down payment and other costs.
Grants and other credits might help. I am writing this article because I have a few Buyer clients asking me for more information. There are a lot of moving parts to know if these grants or other programs are the best for you and your financial situation. When it comes to lending there is not a one size fits all loan. There are some many factors that Lender would look at to determine which loan or program fits you best. Some factors are credit score, down payment, income, active or retire Vets, work history, Native American, purchase price, buyers’ goal for paying off loan and location of home you are looking to purchase.
There are only 4 ways to get grant money or “FREE” money. But be careful of what is called “FREE” money it could cost you more in the future. It is best to have a conversation with your Lender on the different types of Grants or Credits to determine which ones would be best for your financial situation.
1) Lender Grants: Restrictions on income, debt-to-income ratios and/or locations. These grants are only good for closing costs and prepaids.
2) Lender Credit: This will ultimately reflect in a higher interest rate. These credits are only good for closing costs and prepaids.
3) Seller Credit: The one question I ask my Buyer’s: What is most important to you, a lower purchase price or asking for a credit? You must also ask yourself; Do I have enough money for down-payment and closing costs/escrow? These credits are only for closing costs and prepaids. Everyone situation is different! A good Lender that will help advise on your options along with advising you how much credit you will need. I will often call the Lender before making the offer to see how much credit we should write in our offer. Taxes are a big reason why the credit amount might vary from home to home. I also like to use a dollar amount rather than a percentage because it is easier for the Seller(s) to understand exactly how much credit you are asking for. It is very important that you choose a Lender that is available when you are out shopping for homes so you can ask specific questions to the Lender about payment, credits, etc.
4) Non-profit organizations. Usually involve taking classes and also could have restrictions based upon income and/or debt-to-income ratios. They usually have lenders signed up to offer these grants and restricted types of loan programs: FHA or WHEDA. They do have limited money every year and is not a guarantee. You must have an accepted offer and then they determine after that weather or not there is money available. Grants might cover closings costs, prepaids and help with down payment. Question to ask is the grant repayable or not.
NOTE: Prepaids are put into an Escrow account. This account is used to cover the initial costs of expenses, such as private mortgage insurance, insurance, taxes, interest and special assessments.
In conclusion, a good Lender to walk you through each program that you might qualify for is key. Once you get an accepted offer, your lender can do a side by side comparison on loans, points, grants, etc. That way you have a better picture on which program is best for you. As your REALTOR® we can help you through out this process.
If we haven’t already let’s grab a cup of coffee! Buying a home is the biggest investment you will make in our lifetime; our goal is to make your home buying purchase as stress-free as possible.