Home Buying 101

February 2nd, 2007 categories: Mortgages & Finance

This is the seventh post in a series of twelve on buying a home. Click here for the other postings in this series.

In addition to conventional mortgages, there are several programs available to home buyers which are meant to encourage homeownership. While looking for a loan, ask your lender or real estate agent if you might be eligible.

CHFA

This is the program that I refer more clients to than any other. CHFA, or Connecticut Housing Finance Authority, offers a “first time home buyer” program which can be a great deal for the right person. There are income limits (currently $81,000/year for a 1-2 person household in most of Hartford County) and sales price limits (vary greatly depending on area and number of units). The property must be owner-occupied throughout the entire term of the loan and if the home is sold within 9 years, the profit may be subject to a recapture tax if certain conditions are met.

There are some really great things about the CHFA program:

–Low interest rate - currently 5.375%
–More lenient credit guidelines
“–First time home buyer” only means that you cannot have had ownership in a property in the last 3 years
–You can borrow more than 100%
–Borrowers can lock in rate for 4 months
–Single family properties, condos and 2-4 unit multi-families are eligible

One word of caution: Up until last year, when I presented offers on properties for buyers who had a CHFA loan pre-approval, I would receive some flack from seller’s agents. The reason for this is that CHFA used to have more stringent appraisal guidelines and this left many sellers and their agents uneasy. However, CHFA has eased their appraisal guidelines and seller’s agents should not have this issue any longer. If they do, your buyer’s agent should be willing to ease their concerns.

FHA

The Federal Housing Authority insures loans for first time home buyers that lenders may not otherwise offer. Similar to CHFA in that FHA loans have certain borrower guidelines, FHA has sales price limits as well as credit requirements. FHA allows borrowers to put as little as 3% down and allows you to include many closing costs in the loan.

VA

Available through many lenders, VA loans are guaranteed by the federal government to give military personnel more access to homeownership. Eligible borrowers include active and inactive members of the armed forces who meet a certain criteria for length and time of service. Reserve forces may also qualify, depending on length of service, as may those who were discharged and widows/widowers provided spouse’s death was service related. The biggest negative to VA loans is a lending fee which varies depending on the borrower’s eligibility. However, the lending fee may also be financed.

If you qualify, there are many positives about getting a VA loan: