What
type of financing options are available?
There are some programs that offer 100% financing on the sales price,
and a few offer 100% financing on the value of the home.
How
much can you spend on down payment and closing costs?
You can use all your sources of savings, minus a cash reserve, to
pay for down payment and closing costs. Typically, the cash reserve
equals two or three months of housing expense, depending on the amount
of down payment and the loan program. Housing expense includes your
monthly loan payment (principal + interest), property tax, hazard
insurance, and mortgage insurance (when applicable). Savings in IRA,
Keogh, or 401 K plans are counted at 50–70% of their value when
being considered as cash reserves. All other savings are counted at
full value.
How does
gift money affect your purchase power?
If your down payment is less than 20% of the purchase price, there
are some restrictions on gift money for certain loan programs. If
your loan is less than 160,177, at least 3% of the purchase price
should be your own money. For larger loans, at least 5% of the purchase
price must be your own money.
What is a Prepayment Penalty?
A Prepayment Penalty is a fee that may be charged to a borrower who
pays off a loan before a certain period of time, generally three years.
The general penalty is six months of interest on the loan balance
paid off. If you believe you would not be paying off your loan within
the first three years, you may want to consider loans with Prepayment
Penalties because they often offer lower interest rates and costs.
