There are (or maybe were) options for future home buyers.
Given our limited cash, however, we were limited to FHA loans. When we started our search we were qualified for 100% financing. By the time we were ready to make offers, the rules changed and we were basically limited to FHA loans that required “only” a 3% minimum down payment. Whereas, conventional loans required a minimum of 5%. This might be OK in places where homes were selling for under $200K (in child-friendly neighborhoods), but in our region we were looking at $350k – $400K for a reasonable house in a reasonable neighborhood.
That’s when our Realtor told us about down payment assistance programs. After looking over a few different organizations that provide downpayment gift monies, we chose the Nehemiah Program which was started by a preacher in Sacramento, California. Unfortunately, as of October 1st, these programs are no longer allowable. Maybe with our current economic crisis situation, this decision will be reversed.
So, armed with credit approval for an FHA loan and participation in the Nehemiah Program, things were looking up again. That is, until we got our first estimate of closing costs. Ouch! So much for having cash for renovations!
But, our Realtor was and is truly lovely! We had been approved for an FHA loan from a certain bank that is now currently in serious financial troubles. Our loan terms were less than desirable. Our Realtor suggested we meet with a loan officer that she knows who specializes in FHA loans. I highly recommend working with a specialist! Not only did we get better terms, but we learned about FHA’s 203k program.
Is this a retirement mortgage account? Not at all! It’s a way to add the cost of renovations or improvements to the loan for the house purchase. Hurray! Now, we could crunch the numbers again and figure out how much we could afford as a monthly mortgage on the purchase of a to-be-renovated house. The cost of the renovations would be rolled into the mortgage.
If you want to find out the latest news on FHA loan availability, check out the Federal Government’s website for the Department of Housing and Urban Development (HUD), at http://www.hud.gov/. Remember that HUD and FHA are government entities, they have .GOV websites (the .COM websites are not the same thing…).
