Help For First Time Home Buyers
There are many first time home buyer programs available to assist you in your purchase. These programs range from informational courses like this one to federal, state and local government agencies and non-profit groups that can assist you with down payments, lower-than-market rate financing and troubled credit.
Depending on your income and other personal factors, some of these programs can assist you in getting into a home for less than $1,000.
For information about first time home buyer programs and a variety of other home loan assistance programs in California, check out the California Housing Finance Agency’s web site at www.calhfa.ca.gov and the California Department of Housing and Community Development at www.hcd.ca.gov.
Police, teachers, firefighters and other public employees often have access to home loan programs that have favorable down payment options and special income qualifications. If applicable, check with your employee association or retirement system.
When choosing a loan, you’ll be confronted with a variety of choices of how interest rates are applied. There are fixed rate mortgages and adjustable rate mortgages (ARMs). Look at each type of loan carefully and decide, based on your financial situation and ability to stomach roller coaster interest rates, which is best for you!
Fixed rate mortgages are set at a constant interest rate over the period of the loan ‘ usually 15 or 30 years. This provides maximum stability as far as your monthly loan payment is concerned.
ARMs often provide a much lower initial interest rate at the inception of the loan. ARMs are set by an index plus a margin that equals an interest rate for a loan. An index is a gauge of interest rates which fluctuates with current market conditions. The margin is a fixed amount which gets added to the index. There are two different types of ARMs, the standard version that starts to adjust almost immediately after funding and the intermediate ARM, that doesn’t start to adjust for several months to several years.
There is a lot more to know about loans. You can learn more by visiting www.freddiemac.com/homebuyers, www.hud.gov or www.fanniemae.com (click on Homepath) or by simply asking questions of your real estate agent, lender and/or mortgage broker.
If you’re getting an ARM, look for ones with lower margins. Interest rates tend to be similar for most lending institutions, so the real gauge of saving money over time is a lower margin!
Look out for prepayment penalties on your loan! Having one can save you some money every month, but if you refinance or sell your home, you could get hit with thousands of dollars in penalties!