What You Need To Know About First Time Home Buyer Loans

Whether buying a foreclosed home, or a new home, before applying for a home loan, you should know what first time home buyer loans are; and if getting one is your best option.

I recently talked about the steps of buying your first home. It's very important  to follow the correct steps and choose the right home in the buying process. However getting the right home financing is just as, if not more important. This is a part of the process that many first time buyers tend to rush through without very much consideration of the options that are available to them. Rushing through the process with the first loan that becomes available can be a huge, very costly mistake. First time buyer home loans are one option that should be considered.

These loans are largely government funded first time home buyer programs which provide home loans and assistance to first time and low to moderate income buyers. The assistance they offer varies widely from state to state. However there are numerous programs available in most states; and the chances that there's one available that could assist you in your state are very good. Some of the benefits offered by these programs include

• 100% loan to value loans, This means that you could get a loan for the full amount of the price of the home if you qualify.
• Down payment assistance: these programs assist with the upfront cost of purchasing a home
• Interest savings: there are programs in some states that help pay interest on first time buyer loans
• Grants: some programs offer grants for down payment to those who qualify

 Before applying for a home loan find out what programs are available for first time buyers in your state

Negatives of first time buyer loans

There are negative aspects to these loans for some people.

•  Most programs have restrictions on the cost and condition of homes purchased through the program.
• You may be restricted from selling or using the home in any way other than as a primary residence or be required to pay part of your equity back into the program if you ever do sell the home.
• Overall, the program you choose may have control over more aspects of your home ownership than you may be comfortable with.

Home path financing

Home path financing is program offered by Fannie Mae as an incentive to buy foreclosures owned by the company. This is not only available to first time home buyers but is something you should consider as a first time buyer if you are considering buying a foreclosure. The program offers much lower upfront cost, lower down payments and if the home needs repairs, rehab cost can be included in your loan.

First time home buyer loans for bad credit

If you have credit problems, one of your options may be an FHA or VA loan. These are government programs which insure loans for first time buyers and other buyers as well. FHA and VA insured loans allow you to qualify for a home loan with a lower credit score, a lower interest rate and down payment than you would be able to qualify for with a conventional uninsured mortgage. As of now the minimum required credit score to qualify for an FHA loan is 620. FHA and VA can be a good program for first time buyers however it is not restricted to first time buyers as other programs are. I'll be talking more about these programs soon.

Qualifying for first time home buyer loans

The programs are designed to help people who otherwise would not be able to buy a home. So, there are income restrictions. If your income is more than the allowed amount set for a particular program, you will not be able to qualify. Most first time home buyer programs with the exception of fha insured loans are designed strictly for people who cannot qualify for a conventional  bank loan. If you are one of those people, a loan for first time home buyers may be right foe you. If you are not one of those people, there still may be a program available in your state that you would benefit from. So before you apply for your first home loan, It may be worth while to take a look at first time home buyer loans.

Buying Foreclosed Homes

How to buy a foreclosed home

Foreclosed homes are now almost 50% of the market in many parts of the country. Buying a foreclosure is a very good way to get a great deal in a home; and now is a great time to buy one. But it requires a little more caution and and due dilligence than a typical home purchase. Today I'm going to give you some tips on buying and some pitfalls to beware of in the foreclosed home buying process.

How to find foreclosed homes

In times past, locating foreclosures was a bit more difficult than it is these days. They were a tiny portion of the housing market; and were usually sold to investors before they were ever advertised to the public. Today is a totally different housing market. foreclosure homes are easily located through agents, on the internet or in classifieds. However there's much more to consider once you've found one of these homes. I would never suggest anyone go into the purchase of a bank owned home without the help of an agent who has experience in this type of purchase.

Pitfalls to watch out for

The foreclosure laws vary from state to state. Almost all states allow a redemption period. This is a period of time after the home is foreclosed on in which the owner can pay the mortgage and regain ownership. If your agent is experienced in foreclosure purchases he or she will be aware of the laws in your state. However you should make sure that the redemption period has expired before making an offer.

Foreclosed homes will often have been neglected and need repairs. Some needed repairs may be very expensive and may not be obvious in a visual inspection. These homes should always be inspected thoroughly by a professional home inspector and a list and cost of any repairs should be closely considered before making an offer. Just as an example of what can happen, I'll share an experience that a friend of mine had with buying a foreclosed home. The previous owner of this particular home, before moving out had flushed dry concrete down the toilet. This was a problem that was not in any way visible in an inspection and remained undetected until after the home was purchased. Of course the whole septic system had to be dug up and most of it replaced costing thousands of dollars.

All to often when people buy foreclosed homes, they learn that utility bills have been unpaid for many months. They end up having to pay thousands of dollars in past due utility bills before they can get there power and gas to the home restored. You should always check for this before making an offer.

There can often be title issues with these homes. Even though a title search will be done before closing; title issues can still come up years after a purchase. You should never buy a home without purchasing title insurance. Considering the cost is of title insurance it is well worth it.

Making an offer

First of all when making an offer you should be prepared for a long wait. It can sometimes take months for a lender or asset management company to respond to an offer on these homes.

Normally, the longer the lender holds the property, the less they are willing to accept. To a bank or mortgage company, owning real estate is not an asset; it is a huge liability. The longer they own the property the more money they lose. So one huge factor in deciding how much to offer is knowing how long the lender has been holding the property. You agent can get this information from the mls. If a lender has held a home for more than a few months, you may be amazed at just how cheap they will sell. I have often made offers and had them accepted, for less than 50% of market value.

Many first time buyers would like to buy foreclosed homes but just are afraid of the unknown. But the unknown can work to the buyers advantage when he or she knows what to expect, what to look for and what to avoid. Buying foreclosed homes, when done correctly, can be well worth the extra work and time it takes.