Most loans nowadays are FHA-backed and they require at least a 3.5 percent down payment. If you realize that this is a phenomenal time to buy a modest home but feel leery of doing so due to lack of available funds, Phoenix Arizona REALTOR® Jason Smith says you should think again.
“Just recently, I successfully closed on a transaction where my buyer client practically bought a house in Phoenix, AZ with no money down. At the closing table, she even received all of her earnest money back, partly because the seller agreed to pay some of the closing costs.
In a market where 100 percent financing is mostly a thing of the past (only VA and USDA Rural Housing loans still have it available), how is this possible? The answer lies in the Down Payment Assistance (DPA) program offered by the MCID, whose goal is to provide assistance to potential first-time homeowners who have low-to-moderate incomes. Depending on availability, one can receive up to $5000 to be used towards down payment and closing costs. Their rates are competitive; currently, it is under 5 percent, which is considerably lower than a typical FHA or conventional loan.
It seems that nine out of ten prospective buyers I talk to are not aware of this awesome program. When I educate them more about it, I can always sense excitement in their voices, because they know this would bring them closer to achieving their dream of homeownership. So, you may ask, what are the eligibility requirements and how exactly does it work?
- You must have a credit score of at least 620, although score does not guarantee a State Housing approval.
- There are three categories based on income and size of household: Category 1 is repayable and includes those whose income is over 80 percent of the county’s median income. On the other hand, Category 2 (income between 50-80 percent) and category 3 (income is below 50 percent) are forgivable but both require the borrower to complete a homebuyer training course. The Loan Officer can tell you exactly which category you belong to.
- Aside from income limits, there are also home price limits which vary depending on your county.
- You need to stay in your home for at least five years. Otherwise, the loan must be repaid. 20 percent of the loan is forgiven each year.
- You must be a first-time homebuyer or must have not owned a home within the past three years. Single parents with at least one minor child under 18 and 100 percent permanently disabled individuals are exempted from this requirement…”
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