There are several options for first-time homebuyers who want to get a low down-payment loan in today's market.
Check out all the possibilities.
Home ownership has always been an important component of the American Dream, but many consumers are worried
about their ability to buy a home at a tumultuous time in the real estate market.
It's important to know that there are still financing options available for borrowers seeking a responsible, safe and
affordable way to buy a home.
Traditionally, home buyers were required to put down at least 20 percent of a home's purchase price in order to
qualify for a mortgage. Buy with the national median home price still around $200,000, many buyers are unable to
come up with the 44,000 needed for a 20 percent down payment. But low down payment options are still available.
"This is a challenging time for our nation's housing market," says Kevin D. Schneider, president of U.S. mortgage
insurance for Genworth Financial and president of the Mortgage Insurance Companies of America (MICA). "We're
seeing a greater number of low down payment, privately insured mortgage. The high cost of housing in many areas
continues to put home purchases out of reach for many families. The mortgage insurance industry is working to help
low and moderate income borrowers realize their dream of homeownership."
Here are three key tips that can help first-time home buyers who want to get a low down payment loan in today's
1. What are my options if I don't have 20 percent down?
Some mortgage lenders will grant home loans to qualifying home buyers with a down payment of as little as 3 to 5
percent and even less for the most qualified borrowers. A low down payment mortgage with PMI allows first-time
homebuyers to get into a house sooner with a lower down payment.
2. How much can I afford for each monthly payment?
To qualify for most conventional loans, housing expenses should not exceed 26 to 28 percent of your gross monthly
income. Some government loans use a ration of approximately 29 percent of your gross monthly income. Borrowers
should compare their monthly income with monthly long-term obligations and expenses for purchasing a home.
3. How does a loan with private mortgage insurance compare with a piggyback loan?
A single loan with PMI offers a more predictable, cancelable, safe and secure financing option compared to
piggyback mortgages. Piggyback structures, which have virtually vanished from the market in recent months, stack a
high-rate small second mortgage on top of a lower-rate first mortgage. For most consumers, the piggyback loan can
have several drawbacks, including higher monthly mortgage costs, a balloon payment and loss of financial flexibility.
References: Article on Honolulu Advertiser, Sunday, January 13, 2008
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