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First Time Home Buyers Mortgage Programs And Guidelines

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First Time Home Buyers Mortgage Programs And Guidelines

This BLOG On First Time Home Buyers Mortgage Programs And Guidelines Was PUBLISHED On March 12th, 2019

Gustan Cho Associates are experts in helping borrowers with First Time Home Buyers Mortgage Programs.

  • Many millennial home buyers are now entering the home purchase market
  • Many are still under the impression that it requires 20% down payment and great credit to qualify for First Time Home Buyers Mortgage Programs
  • This is not the case with First Time Home Buyers Mortgage Programs
  • On this blog, we will discuss First Time Home Buyers Mortgage Programs and how renters can become homeowners with very little money
  • Many First Time Home Buyers Mortgage Programs require little to no down payment
  • Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on government and conventional loans

We also offer national down payment assistance program where home buyers can get DPA by government agencies. Most home buyers do not have to worry about closing costs. Closing costs can be covered with sellers concessions and/or lender credit.

Understanding The Home Buying And Mortgage Process

First time home buyers should get familiar with the overall home purchase and mortgage process.

  • There are many moving parts to the home buying process
  • A home purchase is most people’s financial decision they make in their lifetime
  • Home buyer and mortgage process should not be stressful
  • Most of our clients at Gustan Cho Associates do not stress during the mortgage process
  • The home buying process should be a memorable positive experience for first time home buyers
  • Educating oneself on First Time Home Buyers Mortgage Programs is not difficult and may be fun

Getting Familiar With The Mortgage Process

Most borrowers who take time out to educate themselves in First Time Home Buyers Mortgage Programs often do not stress during the mortgage process.

  • First time home buyers may want to know the options they have with down payment assistance
  • They may want to understand the difference between the Loan Estimate and Closing Disclosure is
  • There are endless questions first time home buyers may have
  • Shopping for home and entering into a real estate purchase contract is the fun part of the buying process
  • The mortgage process is the boring part
  • The mortgage process does not have to dread or bored

Just think at the potential money you can save by being a homeowner. You no longer have to waste your money on rent.  

How Much Down Payment Is Required On First Time Home Buyers Mortgage Programs

The number one questions by first time home buyers is how money down payment do I need to purchase a home?  It depends on the loan program.

Here are the basic down payment required by home buyers:

  • FHA requires 3.5%
  • Fannie Mae and Freddie Mac require 3% down payment for first time home buyers and 5% down payment for seasoned home buyers
  • VA and USDA does not require any down payment and offers 100% financing
  • NON-QM Loans require 10% to 20% down payment
  • Gustan Cho Associates has investors that will qualify 5% down payment Jumbo NON-QM Loans
  • Bank statement loans for self-employed borrowers require 20% down payment

Down payments can be gifted. Using 401k for home purchase down payment is allowed.

How Much Are Closing Costs On Home Purchase

All mortgage transactions come with closing costs.

  • Closing costs vary. It depends on many factors, especially location and loan programs
  • Closing costs are any costs and fees with the transfer and closing a home loan
  • This includes origination fees and third-party charges
  • Most of our clients at Gustan Cho Associates do not have to worry about closing costs
  • They just need to come up with the down payment
  • Closing costs is normally covered through sellers concessions and/or lender credit

Here are typical common examples of closing costs:

  • Origination charges
  • Discount Points
  • Processing/Underwriting Fees
  • Credit Report fees
  • Title Charges
  • Title Insurance
  • Recording Fees
  • Transfer stamps
  • Attorney’s fees
  • Appraisal fees
  • Surveys if applicable
  • Pre-paids (Escrows)
  • Inspection Fees
  • Any other third-party costs and fees 

Sellers Concessions And Lender Credit For Closing Costs

Lender credit and sellers concessions can be used for closing costs only. Cannot be used for down payment. Property tax proration credits can be used for down payment. Overage sellers concessions cannot be kicked back to borrowers. It needs to go back to sellers. In most cases with seller concession overages, loan officers use it to buy down the rate with discount points.

Here are seller concessions mortgage guidelines:

  • FHA and USDA allows up to 6% sellers concessions
  • VA allows up to 4% sellers concessions
  • Fannie Mae and Freddie Mac allows 3% sellers concessions on primary homes and up to 2% investment homes on conventional loans
  • NON-QM and Jumbo Loans allows sellers concessions but is dependent on the investor

Importance Of Mortgage Pre-Approval By Loan Officers

The pre-approval process of the overall mortgage process is the most important step.

  • One of the biggest reasons for a last-minute mortgage denial and/or stress during the mortgage process is because loan officers did not properly qualify borrowers
  • A loan officer needs to thoroughly review borrowers income, assets, credit, credit scores, public records, tax returns, and liabilities
  • The file should go through the automated underwriting system
  • The loan officer should also thoroughly check with their company’s overlay guidelines and make sure borrower fully qualifies
  • Over 75% of our clients are borrowers who got denied a mortgage by a lender or are going through stress during the mortgage process due to not being properly qualified

Due your due diligence and choose a loan officer who is experienced and a lender with no overlays.

How Much Can I Afford Versus How Much Can I Qualify

The borrower is the only person that can answer how much house can I afford. Lenders will qualify borrowers on the maximum they qualify for.

Mortgage underwriters do not factor the following when calculating borrowers debt to income ratios:

  • Personal expenses such as dining out, vacations, hobby expenses, and other personal expenses
  • Utility expenses such as water, scavenger, telephone, gas, electric, cable, internet, cell phone
  • Child care expense
  • Elderly care
  • Children extra curricular activities and quarterly trips
  • Medical and life insurance
  • Maintenance
  • College tuition
  • Other expenses not reporting to credit bureaus

Lenders only qualify borrowers on debt that report on credit bureaus. Homeowners do not want to get stuck with too much home they cannot afford. Make sure to consider overall housing expenses and not just principal and interest. Overall housing expenses are Principal and Interest, Homeowners Insurance, Mortgage Insurance, and HOA if applicable.

Do Not Add New Debt And Do Not Get New Car

Do not purchase and/or trade in your car during the mortgage process. Average car payment is $400 per month. That is equivalent to an $80,000 mortgage. Do not apply for new credit during the mortgage process. Lenders will do periodic credit checks until the date of closing. Do not load up any credit cards and/or revolving accounts. Do not make any irregular deposits and/or withdrawals. Any irregular deposits need to be verified by mortgage underwriters. Do not change jobs during the mortgage process. Do not tell HR that you will be retiring or give notice that you will be quitting soon. All lenders will do a verification of employment. One of the questions asked on a VOE is will the worker’s job stability be secured for the next three years? If you quit or plan on retiring, HR will tell your lender that you will not be employed with them in the next three years. 

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