As we were talking about last week, we have an unprecedented spread between the 30 Year and 15 Year mortgages.  In the past week, the 30 Year held at 4.22%, the 15 Year ticked down [...]]]>

Freddie Mac’s Weekly Primary Mortgage Market Survey (PMMS) was released this morning. 

As we were talking about last week, we have an unprecedented spread between the 30 Year and 15 Year mortgages.  In the past week, the 30 Year held at 4.22%, the 15 Year ticked down 0.05% from 3.44% to 3.39%. 

We’re looking at a comparison at $200,000 on a $250,000 home.  We’re ignoring closing costs, fees and points as they shouldn’t vary betweent he two loans.  

Mortgage Payment

I understand, $438/month difference in payment is a doozy.  That’s a lot of extra payment for a first time home buyer.  BUT, let’s keep it in context.  These rates are pretty low.  Home prices are pretty low.  

That $200,000 loan is $1,200 on a 30 year fixed in a normal(ish) 6% market.  You’re going to pay less in rate and less on a home than 5 years ago. 

Total Mortgage Payments

A 30 year fixed on a $200,000 loan will want $353,000 from you over time.  The 15 year will want $255,000 over the life of the loan.  That entire difference is mortgage interest. 

Time Value of Money

The argument against the accelerated payment for a first time home buyer is valid.  Are you better served funding college funds, life insurance, or, perhaps most importantly, disability benefits?  Possibly.  

For the first time home buyers who are buying today, it probably makes more sense than ever to talk to a financial advisor.  This combination of low rates and low home prices creates some new options.  Does it make sense to use the low rates to increase your buying power?  Maybe.  Does it make sense to identify a lower-cost home and accelerate the equity prepayment as much as possible?  Maybe.  Can you find a happy medium of being able to fund your asset accounts and accelerate your mortgage, possibly with a 20 year?  Maybe. 

There are more maybe’s in today’s market than ever before, but they represent a unique opportunity for first time home buyer loan programs to not only provide inflation protected housing (unlike rent), but still have options to fund both accelerated debt reduction and still fund all of those longer-term asset accounts.  

We’re in an interesting market right now where the FHA loan has been generally about .25% less expensive [...]]]>

Without a doubt, the most common comparison between loans for first time home buyers is the FHA vs. Conventional calculation.  

We’re in an interesting market right now where the FHA loan has been generally about .25% less expensive in terms of mortgage rate.  

PMI rates do absolutely vary between mortgage companies so it is worth inquiring about while shopping for your mortgage.

• Assuming that .25% rate difference, standard mortgage insurance rates, and a $200,000 home purchase, here is what we get:
• The FHA loan starts out with an extra $1,900 in costs, that’s the UFMIP of 1%
• The FHA loan has a monthly payment that is about $32 less expensive.
• The conventional loan is better in years 1, 2, and 3.  The FHA loan is better after that time.

You can update the comparison to fit your loan scenario by hitting the edit button below. 

As always, conventional loans are subject to loan-level price adjustments and the PMI factors will vary greatly based on FICO score. 

If you have any questions, click the live help button in the left margin and we’ll try and help.

Tomorrow’s First time home buyers saw their 401(k) shrink by 2.5% and saw mortgage rates dip lower buy almost .25% today.

Tomorrow’s Non-Farm Payrolls report from the government has the potential to really be a market mover.  Mortgage bonds staged a massive rally today as fear set in all around the globe.

The Dow dipped to a 3-month low, mortgage rates are approaching late November’s all-time lows, and suddenly the US economy looks like the strongest one in the globe…by default because everyone else is worse off.

We have been forecasting volatility tomorrow all week.  Our mortgage rate predictions were off though:  We didn’t forecast today to be this friendly to interest rates.

We’ll have a post up early tomorrow after the jobs data hits.  Rates have dipped below 5%.  First time home buyers that missed the window in late November have one more shot.  If tomorrow’s job data disappoints, we might be back at all-time low rates.  If tomorrow’s job data shows strength, lock and lock soon.

The IHDA Home Start Loan is a 30 Year Fixed FHA [...]]]> The state of Illinois recently revised some of their first time home buyer programs. These are great examples of what you’ll see from state-to-state.

The IHDA Home Start Loan is a 30 Year Fixed FHA loan with a pretty low rate. It’s 4.75% which is comparable to the rate that you would get on a normal FHA loan.

There are the typical caveats:

• Buyer must be first time home buyer (no ownership for 3 years) OR Veteran (not a VA loan)
• Minimum Credit Score of 640
• Maximum DTI of 43%
• Cannot use other programs like the MCC – Tax Smart
• Borrower must complete Home Buyer Education
• Borrower must bring 1% of purchase price into the deal and show proof it was paid
• Regular IHDA income limits apply as do purchase price limits

This is a good safe program, but the real value is in some of the other options they’ve added.  There are two that are pretty interesting:

Tax Advance Loan

This is a second loan for 3% of the price, up to $6,000.  It carries a really nice interest rate – 0% – through June of next year.  At that point, it would turn into a 10 Year Fixed loan with a rate .5% above that 4.75% rate on the first mortgage.  There are fees of $300 for the program, but $100 is reimbursed if you pay off your loan with your tax return.  This date due may be adjusted based on the extension of the government tax credit.

Down Payment Assistance Loan

This is also a pretty neat program.  It is a forgivable second mortgage that can cover 3% of the down payment, up to $6,000.  The loan then forgives at a rate of 1/120 per month.  There is one huge downside to this loan:  It increases the rate of the first mortgage by .5%.   It is very important to review the numbers on this loan.

If someone had a $200,000 home and the full $6,000 assistance available, it would look like this.  Roughly speaking, the first mortgage costs about $60/month more.  The state forgives the second mortgage at the rate of $50/month.  If you’re in your home for quite some time and you don’t need the DPA to close, you may not wish to pursue this since your entire loan amount is .5% higher forever.

How to apply for Illinois first time home buyer programs

Like most states, Illinois only offers these programs through a certain number of banks.  You can find links to the IHDA site and the official lenders through the Illinois First Time Home Programs page.

Did you know that nearly every state [...]]]> Becoming a first time home owner is no small challenge. Our goal with this site is to provide you with the information needed to make the intelligent choice when looking for loans for first time home buyers.

Did you know that nearly every state has programs to help first time home buyers? States offer different programs with benefits including grants, reduced interest rates, tax incentives and down payment assistance.

First Time Home Buyer Programs

The states vary in how they support home ownership, but they all have programs. Some states have restrictions on income levels, the price of the home, or other criteria. Here is a full list of first time home buyer programs.

First Time Home Buyer Tips

Another resource can be the state or local government. Many provide educational programs that can help. The programs vary from state to state and the links can be found under first time home buyer programs.

First Time Home Buyer Loan

There are many different types of loans for first time home buyers and some are not better than conventional mortgages. As we look at the first time home buyer loan options, we’ll compare a number of common loans for first time home buyers.

As we go on, we’ll tag all of these comparisons under first time home buyer mortgages.