First Time Homebuyers:

What programs are available for first time homebuyers?

Buying your first home is huge. It’s probably the biggest single purchase you’ve ever made and coming up with all the funds to make it happen can be daunting. So, if you’re wondering if there are ways to make all this a little easier, the answer is, yes.

LoanGIANT offers programs designed to help provide homebuyers with less-than-ideal financial circumstances an opportunity to achieve their dream of homeownership.

Possible assistance for first-time homebuyers include:

• Grants for use toward down payments or closing costs.

• Low or no down payment requirements.

• Paying for or subsidizing interest payments.

• Special lower interest rates.

• Partial debt cancellation after a designated time period.

• Deferred payments.

• Reducing closing fees by capping or waiving closing costs.

Not all of these programs may be available in your area, but it is definitely worth your time to find out if you qualify for financial assistance.

Government programs for first-time buyers.

The good news is local, state, and federal governments offer programs to help first-time buyers secure their loans. Often, they offer insurance to the lender because first-time buyers are considered risky. Many programs offer the lender insurance to protect them for taking on that risk. The most common programs include:

• FHA Loan. An FHA loan is insured by the Federal Housing Administration and allows borrowers to qualify with as little as a 3.5% down payment. This loan is best for buyers with low credit scores or those who can only afford a small down payment. A credit score of 580 allows for a 3.5% down payment.

• VA loan. VA loans are insured by the Department of Veterans Affairs. They come with no down payment for military personnel, veterans, and their families, and require a minimum 580 credit score.

• USDA loan. A USDA loan is 100% backed by the Department of Agriculture for low-income borrowers in rural areas. These loans are limited to certain areas and only to borrowers who meet certain income limits.

• Fannie Mae and Freddie Mac. These two government-sponsored enterprises insure qualifying loans, requiring as little as a 3% down payment and allowing a higher debt-to-income ratio. Borrowers need a credit score of at least 620, have good credit, and must pay for private mortgage insurance (PMI) for a down payment less than 20%.

• Home renovation loans. Programs like FHA 203(k), or HomeStyle® help buyers purchase a home to remodel, or renovate. They helping you buy more for your money by covering cost of improvements, extending loan limits, or lowering the down payment.

LoanGIANT offers a growing portfolio of financing options designed especially for first-time homebuyers. In fact, we’re one of the top-rated private mortgage companies in the country because we offer many unique solutions and deliver a high level of personal support and attention. Our Loan Consultants can walk you through all the options and help you find the best loan for your situation. With LoanGIANT, you can move ahead with confidence.

What’s the difference between fixed and adjustable interest rates?

In terms of interest rates, LoanGIANT, LLC offers two types of mortgage loans: those with fixed rates that never change and those with adjustable rates that can go up or down over time. Both types offer the home buyer benefits. Which kind is right for you? Let's take a deeper look.

A fixed rate is predictable and reliable.

The one thing you can say about a fixed-rate mortgage is that you always know what the principal and interest portion of your monthly payment will be. Whether you have a 15-year loan or a 30-year loan, these costs are virtually the same in the first year, the fifth year, the tenth year, and on and on. The only thing that can change are any escrow amounts to cover insurance and taxes.

Fixed-rate loans are popular because they are unaffected by increases in market interest rates. With a fixed rate, your loan's interest never varies, staying predictable and steady, month after month. If market rates drop, you can always refinance your old fixed-rate loan for a newer one at a lower rate. Both the interest rate and the principal loan about will be lower, so it's a double win. You can also lower your monthly payment by making a special payment against the principal of the loan.

Here's how adjustable rates work.

With an adjustable-rate mortgage (ARM), the interest rate changes annually after an initial period of three to ten years of a fixed interest rate. Usually, these loans begin with lower initial interest rates than fixed-rate loans. The most common ARMs have initial periods of three, five, seven, or 10 years. For example, with a 5/1 ARM, the interest rate remains fixed for the first five years, then adjusts to the market rate each year thereafter. If the market rates change significantly during the initial period, your monthly payment could go up or down when the initial period ends. The market drives the direction of the change. Although there is a cap on how much your interest can increase in any single adjustment, there is a risk that your monthly payment could go up significantly over the life of the loan.

Many first-time homebuyers find ARMs attractive as they offer lower initial interest rates. If you do not expect to live in your first home a long time, then you can take advantage of the lower rate before you move on to your next home. The lower initial interest rates can also help first-time buyers qualify for a larger loan.

There is a loan that's right for you.

Lean on your LoanGIANT Loan Consultant in choosing the type of loan that's best for you. Our Loan Consultants have helped thousands of first-time homebuyers navigate these critical decisions. They know the questions to ask. They know the possibilities and opportunities. Our goal is to help you make the wisest, smartest decision possible in becoming a homeowner. 

How is my monthly payment determined?

It's called a monthly mortgage payment, but it includes more than payment on the loan itself. Yes, it will include a portion to help pay off the principal loan amount, but that's just for starters. It will also include interest and will likely include property taxes and homeowner's insurance, as well. It may also include private mortgage insurance (PMI).
Your monthly payment is based on these six things:

1. The initial loan amount

   This is called the principal amount of your loan. It's the purchase price less the down payment. So, if you bought a house for $300,000 and your down payment was $15,000, then your principal is $285,000. That's the amount you are borrowing.

2. Your annual interest rate

   Your interest rate is the percentage of your principal that you are charged each year. For example, if your interest rate is 5%, then you're paying 5% of your principal each year.

3. The life of your loan

   Knowing how many years your loan runs tells you how many monthly payments will be made. Most loans are for 15 years or 30 years. Simply multiply the years by 12 months, and you'll know how many monthly payments you can expect to make over the full life of the loan. For example, a 15-year mortgage equals 180 monthly payments.

4. The annual property taxes on your home.

   Most homebuyers choose to let the lender manage and pay their property taxes. If you choose this, your monthly payment will include an amount set aside to pay your property taxes. This money is actually saved by the lender in an escrow account for you and the lender pays the taxes when they  are due. You don't have to keep up with it. At the end of the year, you may have to pay a bit extra or be given a refund for any escrow dollars left over. Please note that many loans require handling taxes through an escrow account and do not give the homebuyer the option of paying them directly.

5. The cost of homeowner's insurance

   Almost every first-time homebuyer will be required to take homeowner's insurance to cover the cost of repairing damages from storms, water leaks and much more. You will have different policies to choose from. Generally, the lower the deductible, the higher the monthly premium. Whatever you choose, your lender will factor it into your monthly payment. Like taxes, the money is saved in your escrow account and paid to the insurance company as it is due. Some loans give you the option of paying the insurance directly, in which case these costs are not included in your monthly payment.

6. The annual premium for private mortgage insurance (PMI)

   It is not unusual to be required to carry PMI if you made a down payment of less than 20%. As with homeowner's insurance, your PMI costs are added to your monthly payment and placed in escrow. Once you have paid off 20% of your principal loan amount, you may no longer be required to carry PMI. 

Let LoanGIANT crunch the numbers.

For the best estimate of what your monthly mortgage payment will be, get with your LoanGIANT Loan Consultant. They can make sure you've got the right numbers and factor in all the details. They can also advise you if you may be exempt from some costs. They do this every day. Use our expertise. You'll have the best answer possible.

How much should I save for a down payment?

The largest payment you'll likely make on your home is the first one. That's the down payment. It's a percentage of the total purchase price. For example, a 5% down payment on a $400,000 home would be $20,000. The larger the down payment, the lower your monthly mortgage payment should be. So how much should you save? There's no single answer. It all depends on the minimum down payment requirement.

What is the minimum down payment?

Most loans require a minimum down payment, but the amount they require varies according to your lender, the type of loan you're applying for and your credit score. In fact, some government-backed loans require no down payment at all!
Let's look at some examples.

• Veteran Affairs (VA) loans usually require no down payment. These are available to active and retired military personnel and their eligible surviving spouses.

• FHA loans require a minimum down payment as low as 3.5%.

• Conventional loans backed by Fannie Mae or Freddie Mac require a minimum down payment as low as 3%. There are other conventional loans not backed by the government but follow the same Fannie Mae and Freddie Mac guidelines for down payments.

• USDA loans have no down payment requirement. Homebuyers must meet certain income limits. These loans are limited to properties in rural and certain suburban areas.

See if paying more than the minimum makes sense for you.
For some buyers, this is the way to go. A larger down payment can:

• Result in a lower monthly payment.

• Qualify you for a lower interest rate.

• Reduce upfront fees.

• Give you more equity in your home from Day One of your mortgage.

Plus, if your loan requires private mortgage insurance, a large down payment may eliminate that requirement.

How much should you save? You decide.

As you can see, there is no single answer that works for every first-time homebuyer. The type of loan you're applying for, the cost of the home, and your credit score will determine the minimum amount required. Beyond that, it's all in your court. You should assess your financial situation and realistically determine what is possible or desirable for you. A larger down payment will lower your monthly payments but that may not work for you right now. It might leave you in a tight a financial bind.
Let LoanGIANT help you calculate.

For starters, use the LoanGIANT Mortgage Calculator to see how much the size of the down payment will impact your monthly payment. Then work up a monthly budget using that monthly payment number. Make sure you allocate some funds for things that may come up, like repair work and unexpected expenses .

Make as informed a decision as possible. Connect with your LoanGIANT Loan Consultant. Let them shop around for you and compare different types of loans that you may qualify for. See if there is an especially attractive mortgage rate available. At LoanGIANT, we say we are driven by a passion for helping people realize their dream of homeownership. We mean that sincerely and we walk the walk. Our goal is to put you in the home you dream of with as few problems and expenses as possible. We've got the knowledge. Put it to work for you!