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Guest

Sorry for the lengthy post but we really need some help quick. Our lease is running out....

My girlfriend and I are trying to get our first home (condo actually) and have some questions. The place we are looking at is selling for $179k and they offering many incentives to go through their lenders.

They are offering:
Paying HOA for 2 years ($179/month including water/sewage/trash and property insurance)
Paying Property Tax for 1 year (~1.25%)
$2500 gift card to local furniture store

Now are combined income is approximately $2400 a month (we are students). The lender that we have been speaking with has told me that they can not offer me 100% financing on a first time buyer loan due to our low income (she said we would qualify for ~$12x,000 in the high 5% to low 6% range). I believe this is through CalHFA. Our other option is to have my parents co-sign but would give us higher interest rates (low to mid 6%) and have to put 5% down (which we really don't have right now). They will be trying to run us through Bank of America to see what they can offer (and still keep the incentives I believe).

Losing those incentives but getting a better rate would cause us to pay more per month right now. We only plan on living there for 2, maybe 3, years. Our rent is being raise substantially which is the main reason for looking to buy (plus build up some equity for the down payment on our next house). This is in Calif. if that matters.

Should I look at doing an 80/20 loan through them and keep the incentives or try and come up with the down payment? I'm thinking with the 80/20 I can get the low first time home buyers rates?

Thanks for the help.

Guest

Forgot to add that they are also offering a 3% return on the loan to cover closing costs, etc.

Guest

Samantha

Srt,

I must say that the offers are attractive indeed!

Now, if you are looking for 80/20 loans, please drop the idea. You are first time buyers and have already decided to put up there for 2 to 3 years. After that, you will have to repay the loans. Are you financially strong enough to pay off the two loans together, that too, the second being usually offered at a higher rate? Well, from your post, I don't think so. Hence, to be on the safer side, I think you should rather go for some kind of don payment assistance if it's not possible for you gather the funds.

Had you been offered 100% financing, the interest rate would have been higher. Hence, I feel, you should go for the second option - let your parents cosign while you and your girlfriend get the loan in your name and try to put down 5% as you will be getting back 3% of the costs at the end of 2-3 years.

Hope my suggestions will help you...

God bless you.

Samantha

Posted: Wed Apr 25, 2007 10:32 pm Post subject:

The 3% is being returned at the beginning, after close of escrow (so no money will be paid out of pocket for closing costs).

Your thinking that investing pretty much all of our liquid assets (rendering all of our bank accounts to zero) into a down payment and going with the cosigner is a better idea? Even though the rates may be worse than that of both the loans under an 80/20 combined? Or am I just looking at it all wrong?

Thanks for the help thus far, btw.

Jessica

Hi Srt,

Welcome to our community forums.

I have been reading through your situation and I feel you may approach organizations offering down payment assistance programs to first time buyers. Since you are located in california, you might want to check out with down payment assistance provided by the California Housing Finance Agency (CalHFA) at "http://www.calhfa.ca.gov/homeownership/programs/chdap.htm". You may also try out with assistance programs offered by the AmeriDream, Inc.

I would like to agree with Samantha here. Going for a traditional 100% financing would be a better choice instead of choosing an 80/20 loan. And, if you are able to get down payment assistance, then you can go for the traditional 100% financing.

You might want to check out with a discussion that our community had on Down payment assistance programs.

Feel free to clarify any doubt that you may have.

Regards,
Jessica.

Samantha

Well, how much is the lender offering on 100% financing? and is it really worse than the 80/20 mortgage? because I have always heard that 80/20 loans will cost more because there are two loans and the secodn one comes at a very high rate of interest as it is subordinate to the first. Also, is this the only lender that you have been talking over for your loan requirement. Well then, you should shop with some more lenders and hofefully you will be able to get better rates and terms.

Trust me, you can come out with some great offers if you go mortgage shopping. There are lots of special programs offered for first time buyers and all you need is talking to lenders about your requirement. It may take time but I hope it won't be that longer until you get a great offer.

Samantha

kenstampe · Posted: Thu Apr 26, 2007 12:12 pm Post subject:

srt42b,

the community needs more information about your choices. I read your post twice and am still confused as to what you are being offered in order to get the incentives and if that includes the CALHFA or not.

Are you working directly with a loan officer at Bank of America or a mortgage broker who would be sending the loan to Bank of America? Also, find out if they are talking about a community commitment or community accomodation program for you.

Reply back and let's see if we can give you better answers.

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