This post is well past due. I’m unable to count on my hands how many times I’ve discussed buying my first house, and the surprised response I get.
DISCLAIMER: The intentions of this post are NOT to tell you how or whether you should buy a house. It is my opinion that there should be extensive research and fact-finding about real estate and mortgages prior to actually embarking on this journey.
What I do want to be understood is that there are options out there for those on the lower end of the pay scale or with not so great credit (for some reason there seems to be a strong correlation, but that’s another article). I am speaking of a FHA (Federal Housing Administration) loan. There is also a VA loan for vets that usually have even better options. A FHA loan is a government insured-loan, meaning if you default the government will pay back what you owe. Which is why banks are willing to offer a mortgage with so little from you.
As of today, October 9, 2011 the down payment required is 3.5% for FHA loan. Meaning for every $100,000 you must have $3500. Now that is the standard with adequate research you may find assistance for the down payment from your state/county/city.
I would be remissed not to mention the credit criteria which will vary from bank to bank. The absolute minimum is a 580, but it may be difficult to find a bank to accept that score. 620 usually flies, but anything under 680 will usually demand credit counseling. There are free credit services to educate and help strengthen your credit scores. I would avoid any programs that demand money and promise you perfect credit. With this I would say anything that sounds to good to be true usually is.
In conclusion, FHA allows people with little money for a down payment and/or low credit scores to purchase a home. It requires 3.5% down, and some banks will take a score as low as 580 (with mandatory credit counseling). Before you start this journey do your due diligence RESEARCH, RESEARCH, RESEARCH! What that consists of will take a whole other post but this LINK covers a lot of what’s included.
Questions/comments are welcome. Please let me know if this helps by liking or leaving a comment.