Most people want to own their own home–it’s part of the American Dream.  There are a variety of programs, grants, and loans that help first time home buyers get into a house, sometimes with little or no money down.  Home prices have started back up, so many folks are choosing not to wait any longer to buy.  I work with first time home buyers, and often it’s cheaper to buy than to rent.  Record low interest rates, decreased house prices, and first time buyer’s programs make home buying now especially appealing.

So, how do you go about buying a house?  Many will look on the internet to get a feel for what’s out there, guess what they think they can afford, and there’s nothing wrong with that.  And, there’s always driving around and picking up fliers.  If you’re just starting out mortgage calculators can give you an idea of what monthly payments on a loan will be.  If you need a quick back-of-the-envelope type estimate, figure that a home mortgage costs about $5/1,000, meaning you’ll pay around $500 a month for a $100,000 loan.

A better way to go about the process, once your plan gets a little momentum, is to talk to a lender, who will be able to tell you exactly what you can afford, and once you get that number, your home search will be much easier.  Finding a good Realtor will also help you.  It doesn’t cost anything  as a buyer to work with a Realtor, and they’ll be able to guide you through the home buying process, which is often emotional and complex.

There are a number of programs exclusively for the first time home buyer, and there are other available programs for all buyers, that often help first timers, which in summary are:

• Oregon State Bond Program:  Up to 3% for buyer’s closing costs or lower interest rate on the mortgage.  Within Oregon.
• HAP:  Up to 10K as a zero interest silent second.  Within Eugene city limits.
• SHOP:  Up to 7K as a zero interest silent second.  Within Springfield city limits.
• USDA:  100% financing (zero down payment).  In Lane County, eligible properties are outside Eugene and Springfield city limits.
• VA:  100% financing (zero down payment)  For veterans only.
• FHA:  3.5% minimum down payment.

Some of the programs and are income based.  Some are area specific.  And, all of them have their own unique set of requirements.  A good lender will be familiar with the programs and a good realtor will know what types of houses qualify for which program.  Also, some programs are sometimes out of funds, and therefore temporarily unavailable–again, this is something your lender should know.  Below each of the programs is described in more detail.

Oregon State Bond Program:

• For first time home buyers, meaning buyer hasn’t owned a home in the last 3 years.
• Can be combined with 15 to 30 year FHA or USDA loans.
• Program provides up to 3% for buyer’s closing costs, or lower interest rate on the loan.
• House must be in Oregon.  Can be used or newly constructed site-built, however the underlying loan may have its own requirements, such as no used mobile homes for USDA; each loan program has its own requirements, though.
• No bankruptcy in last 2 years or foreclosure in 5 years.  The underlying loan will have its own timing requirements if you’ve had a short sale, foreclosure or bankruptcy.
• If the house is sold within 9 years of purchase and your income limit exceeds certain set limits for the year you sell, you will be required to pay back some of the money, although this doesn’t often happen.  Your lender will review it and explain it to you.
• There are income limits by county and number of people in the household.  A budgetary estimate of income limits in Lane County is 70K to 80K, or 115% of the median income that year.
• There are property value limits.  A budgetary estimate for Lane County is 313K to 383K, depending on location.

HAP

• No funds are available before July 2013.
• For first time home buyers, meaning buyer hasn’t owned a home in the last 3 years.
• Maximum income requirements based on family size.  In 2012, this ranged from 33K to 55K.
• House must be within Eugene city limits.
• Must be your primary dwelling, single family (can’t use as a rental or be a duplex).
• Up to 10K in funds for down payment or closing costs, in the form of zero interest, silent second mortgage which doesn’t need to be repaid until you sell or refinance.
• House must meet HUD requirements.  The condition of the paint is very important.
• Maximum house price is about 260K.
• Used in conjunction with another loan program, for example FHA, for which you must qualify.

 

SHOP

• For first time home buyers.  Buyer or their spouse can’t have owned a home in last 3 years.
• Up to 7K in funds for down payment or closing costs, in the form of zero interest, silent second mortgage which doesn’t need to be repaid until you sell or refinance.
• House must be located in Springfield city limits.
• Maximum income based depending on family size.  Income maximums between 31K and 59K in 2012.
• Must be primary residence.
• House must meet HUD standards.
• Maximum house value is 185K.
• Buyer must contribute $1,500. of their own money.
• Used in conjunction with another loan program, for example FHA, for which you must qualify.

USDA guaranteed loan

• Not exclusively for first time home buyers.
• Minimum down payment:  0.
• Maximum income requirements based on area and number of people in household.  In Lane county, with 3 people in the household, the maximum income is approximately:  74K.
• The house must be in the USDA definition of a rural area.  In Lane County this excludes properties in Eugene and Springfield city limits.
• Maximum purchase price is $417,000.
• Property types:  Generally existing or newly site-built.  In certain instances modular or manufactured homes may be allowable, but check with your lender for the latest on that.
• Farms are, surprisingly, not acceptable.
• There are specific time requirements for bankruptcy, short sale or foreclosure.  Almost all loan programs need at least 2 years and sometimes the minimums are more.
• All household income is counted towards the income maximums even if person is not on loan.

 

VA Loans

• For Veterans
• Zero down payment up to a home price of 417K.
• No location requirement for the house.
• There are specific time requirements for bankruptcy, short sale or foreclosure.

FHA Loans

• 3.5% minimum down payment.
• House must meet HUD standards.
• Loan maximum by county.  In Lane County, it’s currently $417,000.
• There are specific time requirements for bankruptcy, short sale or foreclosure.

Generally, for all of the loans and programs you’ll need to meet minimum credit standards and have verifiable income.  Your loan officer will know the most about the requirements of different loans and programs.

Most home purchases with mortgage loans have closing costs.  Closing costs may include:  prepaid home insurance, prepaid taxes, loan fees, and a surprisingly large number of other expenses.  Each deal and each loan will vary in the amount of closing costs, but a back-of-the envelope estimate is 3% of the sales price.  As a realtor, I usually try to get the seller to contribute as much as possible to closing costs so my buyers have to come up with as little out of pocket costs as possible.  Typically, when you’re buying a home, you don’t have an abundance of excess cash laying about.

I helped the buyer of this home; she was a first time buyer and had to come up with very little cash out of pocket and utilized some of these programs.  It was cheaper than renting for her, and the purchase price was 100K.  What a deal!  If you’re interested in buying a house in Eugene Springfield or anywhere in Lane County, Please contact me.