Mark Anderson is a lender with Pulaski Bank that I work with quite often. Lately I have heard a lot of concern from some of my clients who are just at the beginning stages of looking for a home. The general concern is that they won’t be able to qualify for a loan or they will be required to have a huge down payment. Below is Mark’s response to that concern.
Despite what we’re hearing on the news, very little has changed with access to financing for average home buyers. It is true that the credit markets have tightened. It’s also true that some banks have gone out of business. But these changes have had very little impact on basic approval standards for home loans. Chances are, if you have at least fair credit and are able to afford the house payment you are looking to take on, you can be approved for a mortgage. And again, despite what you may hear on the news, you won’t have to take a high interest rate, or an adjustable loan just because you don’t have a 700 credit score.
The one major change that has affected home buyers over the past 12 months involves down payment requirements. You used to be able to take a 30-year conventional mortgage and not have to make a down payment at all – as long as you met certain approval standards. These days, you will have to make a down payment, but the amount is not as much as you may have heard. No one waived a wand and required all borrowers to make 20% down payments, regardless of the credit crunch. In fact, the minimum down payment available, through FHA, is 3%. What’s even better is that this 3% can come from gift sources or from the State of Missouri first time home buyer program, MHDC. Using either a gift from family, or funds from MHDC, you can actually still purchase a property with minimal out of pocket cost.
Dawn and I recently closed with a client who took advantage of MHDC. After negotiating for the seller to pay closing costs, our client only had to come up with enough funds to cover her home inspections and a couple other optional add-ons like a home warranty plan.
To take advantage of MHDC, you need to have not had an ownership interest in a Missouri property for the last 3 years. Your income also needs to be under a certain level depending on how many people are in your household and in what area you are intending to buy. MHDC is called a ‘no interest, forgivable second mortgage’, meaning that you don’t make payments on the money and that over time, the loan balance diminishes. Every year you remain in the property after the purchase date, one-fifth of the balance is ‘forgiven’. After 5 years, the balance goes away entirely.
MHDC goes through periods of availability. Right now there are still funds available. Once they are gone, you can be added to a waiting list. Feel free to contact me anytime for up to the minute details on availability and on qualifying guidelines.”