(Contributed)
Many renters are under the impression that they can’t afford to buy a house. Some think they need to save a bunch of cash for a down payment. Others believe the monthly expenses are too high. While these assumptions may be true, loan programs for first-time homebuyers can make it much easier to become a homeowner.
Last week, I shared some information from Ginny Richards, senior loan officer for Kind Lending in Ukiah. This week, I’ll share even more by summarizing a first-time homebuyer program from Golden State Finance Authority called the Platinum program.
Just so we’re all clear, even lenders who have great programs for first-time home buyers are in the business to make a profit. This means they need to manage risk. If you come in with no job and no money, most lenders will turn you away.
To qualify for a home loan, you generally need the following: a solid credit history (a credit score in the mid-to-high 600s); verifiable income (if you don’t report it, no one can verify it); minimal other debt or encumbrances (such as student loans, car payments, or alimony/child support); and job stability. Ideally, you need to have been doing the same job for at least a year, and it needs to appear that you will remain in that job for the foreseeable future.
If you can check all these boxes, then keep reading because the Platinum program in concert with a loan insured by the Federal Housing Administration offers a discounted interest rate and a low down payment. If you don’t have enough cash for a down payment, the Platinum program can provide down-payment assistance.
Let’s say you want to buy a home that costs $400,000. At a discounted interest rate on a 30-year, fixed-rate loan, the monthly loan and mortgage insurance cost would be approximately $2,840. In addition, you’d need about $415/month for property taxes and $145/month for fire insurance. In total (not counting utilities and homeowners’ insurance), you’d need $3,400 per month.
If you have good credit and no other debt, lenders will allow you to allocate up to half of your income to housing costs. So, you could qualify for this loan if you make about $82,250 per year as a household. If you and your spouse (or partner) are going in on this together, each of you needs to make at least $41,125 annually.
Even if you take advantage of the down-payment assistance, you will still need a few thousand dollars to pay for things like a good-faith deposit when you make the offer on the home, an appraisal, and a credit check.
Once you’ve purchased the home, you’ll also need to budget for expenses the landlord used to pay for, like painting your home, replacing the roof, buying a new water heater, and similar maintenance.
Although there are many costs associated with home ownership, there are also many benefits, the most obvious of which are financial. Your monthly mortgage payments allow you to build equity in an investment that is likely to increase in value over time. I can’t make promises, but during the past 50 years, the overall trend in the value of real estate has been up.
Owning your own home also has benefits that go beyond financial. You get to pound a nail and hang your child’s artwork wherever you want without asking anyone for permission. You get to plant trees, paint a room your favorite color, and replace ugly carpet. And all your hard work benefits YOU.
If you think you might be able to purchase a home and you’d like to learn more, call your local Realtor and they can help you figure it out.
Big thanks to Ginny at Kind Lending for her help with this article. If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.
