Down payment question

smckaybiz · Posted: Fri May 08, 2009 7:17 pm Post subject: Down payment question

So here's my situation. I've been working so hard to pay down my credit card debt that I haven't had much time to save up for a down payment. I was originally planning on buying a home using an FHA loan with 3.5% down. We have them down from $160 to 130K which is perfect because I only have about $5K saved up for the down payment. The only problem is that we just found out that there are a lot of things that need to be done for the FHA qualifications and the Owner feels they've already come down enough and won't budge to do the repairs.

My question is what kind of down payment would I be looking at if I were to look into other mortgage options? My wife and I have credit scores of around 720 and and our d/i is only about 25%.

Any advice would be greatly appreciated.

Thanks

jenkin7 · Posted: Sat May 09, 2009 12:45 am Post subject:

Hi smckaybiz,

As far as I know, FHA loans are the only loans these days that require you to put down as little as 3.5%, and yet help you avail current market rates. There are low down payment loans as well. But they will charge high interest rates. For conventional loans, you will be required to make a down payment of at least 5-10%. By the way, why are you backing out of an FHA loan? What exactly is the problem you are facing to qualify for an FHA loan?

gmakerley · Posted: Sat May 09, 2009 6:22 am Post subject:

scott, have you thought about a 203k renovation loan? you'd still need your 3.5% and closing costs, but you'd be able to borrow the funds for the work that the owner won't do.

seek out grants in your area as well; perhaps there are non-profits that will assist you.

smckaybiz · Posted: Sat May 09, 2009 5:01 pm Post subject:

Thanks. It's nothing major that needs done. Just a lot of simple things like putting up hand rails alongs both sets of stairs. The biggest things are they need to put a fence up around the pool that's out back and there is some old debris on the property that needs to be removed.

They're saying that if they have to do everything than want 145K and I'm just not willing to pay that much for it. I know it's not 15K worth of work that needs done.

Never heard of a 203K renovation loan before. Do you think i could persue that with a local lender or would i be better to search online?

eric1 · Posted: Sat May 09, 2009 5:33 pm Post subject:

Scott, there is also a program called the "Flex 97" which will allow you to put as little as 3% down. You need a 700 score which you meet.

gmakerley · Posted: Mon May 11, 2009 8:27 am Post subject:

no need to search online - a local lender ought to have the product.

smckaybiz · Posted: Mon May 11, 2009 7:28 pm Post subject:

Great! Thanks for all the advice. I still have plently of time so I'm sure I'll be able to find the best product that suits my needs.

jerry · Posted: Tue May 12, 2009 4:10 am Post subject:

Hi Scott,

Both FHA-backed 203k renovation loans and Fannie Mae-insured flexible 97 loans are good options for you. The 203k renovation loan will require you to put down at least 3.5%, but you can finance upto a maximum of $30,000 renovations into the mortgage. The loans can even go upto 110% of the appraised value of the improved home. Down payment assistance is also allowed.

Fannie Mae-backed Flexible 97 loan requires you to put down only 3% of the purchase price of the home and this amount may come from sources like gifts, grants, loans from relatives etc.

You should contact a local lender to know more about these programs.

Thanks,

Jerry

gmakerley · Posted: Tue May 12, 2009 7:44 am Post subject:

actually, jerry, the costs of renovation/rehabilitation are not limited as you said. what would be limiting, if anything, is how much a borrower can afford. these 203k loans do not limit a borrower to required repairs, either. a borrower can choose other types of improvements, so we can accommodate someone wishing to do lead remediation, for example, as well as simple remodeling or upgrading.

the flex 97 product is a tough one to use these days. very good credit is imperative, because mortgage insurance companies are far less willing to write insurance on low down payment loans. a regular fha loan with 3.5% down is a better alternative, in my opinion. either of these, of course, presupposes that there are no needed repairs.

eric1 · Posted: Tue May 12, 2009 7:51 pm Post subject:

George, good point.....the credit requirements are much tougher with the flex products vs FHA

Mike · Joined: 31 May 2009 Posts: 12 5.27 Dollars($)

We have actually completed the consulting on projects with over $100,000 in rehab costs and many over $75,000 in rehab.. You go George. You know your stuff. Mike Young, 203konline, PO Box 621493, Charlotte, NC 28262
1-877-207-6565

gmakerley · Posted: Mon Jun 01, 2009 6:37 am Post subject:

thanks mike...i just sneaked a peek at your site - i like the looks and you've got some good information on there.

we've grown our 203k portfolio by leaps and bounds lately. honestly, i'm a latecomer to the product, but the training i've had in-house has been exemplary, added to the earlier experience (minimal) that i had.

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