Blue Onyx Realty Guides Clients Through New Home Financing and Purchase Options
If You’re a First-Time Home Buyer in Paterson, Consider FHA Financing or Rent-to-Own Financing
Buying your first home can be pretty stressful. You have a lot of decisions to make about where you live, how much you can truly afford, and most importantly, what kind of financing makes the most sense for your financial situation. Fortunately, Blue Onyx Realty has earned its reputation for easing that stress, by providing first time home buyers the financing information they need to make the best decision about their new home loan or mortgage.
Our Paterson real estate agents have extensive expertise in guiding buyers through the home financing process and can help ensure you have the proper qualifications and documentation you need to get approved for FHA Financing or Rent-to-Own Financing.
Even If You Have Bad Credit, You May Still be Eligible for an FHA Loan
FHA Loans are government-backed mortgages that are issued by the Federal Housing Administration (an agency of the US Dept. of Housing and Urban Development). Many first time home buyers choose FHA Loans because they require less down payment than a conventional loan and are generally more lenient when it comes to credit scores, qualifying requirements, and down payment assistance. Another pro for FHA Loans- they typically come with lower mortgage rates.
Are You a Good Candidate for an FHA Loan?
If you answer “yes” to any of these questions, an FHA Loan might be your best option:
- Do you have a low credit rating?
- Would you struggle to come up with a large down payment?
- Will some or all of your down payment be received as a gift?
- Is your debt-to-income ratio high?
- Are you purchasing your first home?
6 Things First Time Home Buyers Should Know About FHA Loans
If your credit is less than perfect, you may still qualify for an FHA Loan.
With FHA Loans, your credit score is one factor that determines what percentage of the loan you will need for a down payment. For example, to get a mortgage with a down payment as low as 3.5 percent, you will need a credit score of 580 or higher. If your credit score is between 500 and 579 your down payment increases to at least 10 percent of the home loan.
Tip: Before you borrow, know your credit score.
With an FHA Loan, some of your closing costs could be covered.
The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, like appraisals, credit reports and title expenses. Sellers and builders often offer to pay closing to help sell the home. However, if the seller pays your closing costs, you could be charged a high-interest rate.
Tip: Compare loan estimates with different lenders before you choose a lender or agree to the seller’s offer.
Your lender must be FHA-approved.
The FHA is not a lender. The FHA is an insurer. This means you need to get your loan through an FHA-approved lender. Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan.
Tip: Costs, services and underwriting standards vary between lenders or mortgage brokers. Make sure you shop around for the best rates before you accept the loan.
You will need to purchase two-part mortgage insurance.
All FHA Loans require two mortgage insurance premiums, an upfront premium and an annual premium.
The upfront premium is 1.75 percent of the loan amount and is paid when you get the loan (example: $1,750 for a $100,000 loan)
The annual premium varies based on the length of the loan, the loan amount and the initial loan-to-value ratio, or LTV. You pay this premium monthly for the life of your mortgage.
Your FHA loan can include extra money for repairs to your new home.
If your home will require repairs, the FHA offers a special loan called a 203(k). The loan amount for your new home would be based on the projected value of the home rather than the current appraised value. A “streamlined” 203(k) loan is a variation of the 203(k) loan that would allow you to finance up to $35,000 for non-structural repairs like updating cabinets, paint and lighting.
Financial hardship relief is allowed.
FHA insurance isn’t an easy way out for borrowers who want out of their house payments. FHA insurance can be there to help out if you’ve suffered serious financial hardship or are struggling to make mortgage payments. Options include a temporary period of forbearance, a loan modification that would lower the interest rate, an extension to the payback period, or a deferral of part of the loan balance at no interest.
If You’re Not Able to Secure a Conventional Loan, Consider Buying a Rent-To-Own Home
Rent-to-own homes are made available through a standard lease with option to buy. To sum up a rent-to-own option, the tenant-buyer and the owner agree to the price of the home over a specified amount of time (usually one or two years). There will be terms and conditions that both parties will agree to, such as- what percentage of the rent will go towards the purchase price of the home (usually 2.5 – 7% of the purchase price). The tenant-buyer will pay a one-time, non-refundable fee called an “Option Consideration.” This is NOT a security deposit. It is a fee that secures the agreement and in most cases, will be applied to the price of the home at the end of the agreement. Over the agreed period of time, you both will adhere to the terms of the contract.
Typical rent-to-own terms and conditions look something like this:
1. In order to receive rent credit, the buyer-tenant must make the rent payments on time (usually the 1st of the month). Failure to make rent on time will result in late fees and loss of equity for that month.
2. The tenant-owner is responsible for all maintenance fees, including things like broken windows, yard work, etc.
3. The owner is responsible for all major repairs