Mountain Mortgage Guy: Want to buy a home instead of renting? Help is out there (column)
The Mountain Mortgage Guy
Springtime in the Rockies means a lot of locals are looking for a new place to live, and finding a place in Eagle County is always a challenge. Many have a dream of buying a home but think it’s impossible. For some, it is, but there are a few options out there that might help homebuyers get over the hurdle.
There are several programs out there for the income-challenged and a few that, within reason, can accommodate the credit-impaired. For those who lack a down payment of 3 percent to 5 percent of the purchase price, there are a couple of programs to help with that, as well.
Debt-to-income ratios for getting a mortgage have loosened up considerably the past year or so, but as I always warn my clients, just because I can get you approved for a high payment doesn’t mean you really want one.
Technically, I can usually get loans approved if the housing expenses (which include principal, interest, taxes, insurance and homeowners association dues) and minimum card and loan payments do not exceed half of your monthly income. That’s up substantially from a few years ago when 42 percent was the cap. There are possible options if you have a family member who can co-sign the loan and guaranty the payments in the event you default if you can’t make the grade on your taxable income.
Credit wise, one generally needs a credit score of at least 620, which allows most people to have a few dings and dents in their payment history. If the property you want to buy qualifies for a Federal Housing Administration loan, then a 580 score will often get approved. But know that a low score will substantially increase the rate and closing costs of your loan.
If you are borderline, then you might want to engage in a serious effort to pay down your credit card balances to 30 percent to 40 percent of your credit limits. If you have unpaid medical collections, then you can now get those wiped from your credit report by paying them off.
If you are down payment challenged, then there are two options that might work. One program allows for the purchase of a home with as little as $1,000 down. Another will loan you 100 percent of the price, plus closing costs. Beware that neither of these will generally work on a condo in Eagle County unless you and/or the seller are willing to spend about $1,000 and wait a month to get the project FHA approved.
There is also a program that will provide you with a down payment grant of about 4 percent of the purchase price, or a second mortgage loan in that amount. The grant is harder to qualify for than the loan. Eagle County also has a program for second mortgages to use toward your down payment.
If you are fortunate enough to have a rich uncle who would gift you money toward a down payment, then that can be part of the mix, as well, although if the down payment is less than 20 percent, you will have to put up part of the money yourself.
Figuring out which mix of the above will work for you requires expert advice and some serious thought by you and your loan originator. There is a maze of angles to look at and calculations to do.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage-related questions from readers. His website and blog can be found at http://www.mtnmortgageguy.com.