“I know prices are low and interest rates are great, but how will we come up with a 20% down payment?”

If I had a dime for every time I’ve heard that, I would be fairly wealthy. Apparently lenders are hearing it too, as they are starting to roll out plans that don’t require that large down payment. For example, Wells Fargo has their Community Development Mortgage Program [CDMP]. Under the CDMP buyers only need a 2% down payment to get to the closing table. For your average $135,000, you could be unpacking and rearranging the furniture in your new home for an initial investment of $3,000.

There are some requirements, but they are relatively minor;

• Owner-occupants only [no investment property]
• Minimum 620 FICO score
• No “bad marks” [late payments, foreclosure, repossession, etc.] on buyer’s credit score for the past 12 months.
• The interest rate will be slightly higher — perhaps a half-percent.

If you have been sitting on the fence waiting for the right moment to invest in a new home, this new mortgage plan might be just the thing to pull you off. If you would like more information, please email me and I’ll set you up with a Wells Fargo representative. The Federal tax credit ends on November 30, which is a lot closer than you think.

[edit: I forgot to add that there are some other requirements concerning income and the size of the home. For average buyers investing in a starter home, however, you should have no problems. You just can't buy the Biltmore with this.]

HUD has released updated guidelines allowing for the use of the $8,000 tax credit for first time home buyers at the closing. Those guidelines are in Mortgagee Letter 2009-15 [which is as long and filled with governmentese as you expect]. Here is a brief summary.

FHA-approved organizations [which is just about all banks and mortgage lenders] are allowed to purchase your $8,000 tax credit. This will allow you to use the credit at closing to cover most of your closing costs. One major catch — you can not use the credit to cover a required downpayment So, if you have an FHA mortgage, you still have to bring 3.5% to the closing table, but you could use the credit for just about anything else — closing costs, prepaid taxes & insurance, and so on.

While this isn’t everything, it is still a great step forward. Knowing that the $8,000 will cover closing costs, buyers can be a bit more aggressive on the price they offer and get into their first home for a lot less.

If you are interested in looking for your first home, please email me and we’ll get started