Financing in Abilene>Question Details

Mike Hoffnag…, Real Estate Pro in Abilene, TX

which financing is best for a first time home buyer

Asked by Mike Hoffnagle, Abilene, TX Sat Apr 28, 2012

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It really does not matter if they are a first time home buyer or not. The best financing depends on their needs and goals and what they would qualify for. If they do not want to or have enough funds to put down 20% then FHA is probably the way to go. Depending on the area there may be other options such as USDA if they and the property qualify.

You should have your clients speak with a couple lenders to get an idea of what they qualify for and what type of loan is best for them. Forget the first time home buyer thinking.... think about your clients needs and find a couple professional individuals you can refer your clients too who are not working with a lender so they can get educated on their options.

Don Groff
REALTOR® | Mortgage Broker
Keller Williams Realty | 360 Lending Group
o 512.669.5599 m 512.633.4157
0 votes Thank Flag Link Mon Apr 30, 2012
It depends on how long they plan to stay there, if they need more seller concessions that FHA can offer, and a whole slew of other things. But off the top of my head I would say FHA, and if they are a teacher, fireman, EMT, or policeman then the Good Neighbor Next Door FHA program is a steal of a deal at 50% off the listed HUD price.
0 votes Thank Flag Link Mon Apr 30, 2012
Mike, based on your profile I get the impression you are asking for one of your clients? There are numerous answers to your question, but it boils down to what program is the best for the individual. There are a lot of lenders and agents that think an FHA loan is the best. If there is any other program they can qualify for, they need to consider NOT doing an FHA loan. The interest rate is very attractive, but with the new mortgage insurance requirements, the "effective" rate is extremely high. Options other than FHA, should they meet the guidelines/requirements:
1. The FTHB from BBVA Compass - 5% down, no PMI, all funds, including down payment can be gifted from a relative, first payment not due for at least 4 months. Rate is higher than FHA, but monthly payment is a lot less due to no PMI. Min. 680 credit score needed.
2. USDA - if property qualifies, no down payment, good interest rate.
3. CRA loan for low-to-moderate income borrowers - 3% down, no PMI, all funds can be gifted. Income is limited to 80% of median income for area. Again, rate is a little higher, but payment is less than doing an FHA loan. Min. 620 credit score needed.
4. Community CRA loan for teachers, fire fighters, law enforcement officers, nurses, medical techs. Same as CRA, however, can use 100% of median income. On these two loans, if just one borrower can qualify, don't have to put the other borrower on the loan. This is done all the time. Min. 620 credit score needed.
5. Doing a 5% down payment and doing a loan that does not require PMI, even though the rate is slightly higher. Payment is still less than an FHA loan and MUCH less than paying PMI on 5% down conventional loan.

I'm sure a lot of people will answer/argue that they need to save up for a 20% down payment. That is commendable, but not always practical. For every $1,000 they reduce their loan, they are saving around $5,00 a month in P&I. Therefore, they might be spending $20,000 to save $100 a month. Over the life of the loan, this can be huge, but they may be needing that $20,000 to furnish the home or make upgrades/repairs to make the house more like they want.

Those are just some of my thoughts. I guess you figured out I'm not a big believer in putting a lot of money down on a house for a first house, especially in Texas with our Home Equity refinance law. I'm sure there will be those that disagree, but that's why there is both chocolate and vanilla ice cream, we have a choice.

If you want to discuss these options further, feel free to call me at 972-705-2806.
0 votes Thank Flag Link Sat Apr 28, 2012
A lot will depend on how much of a down payment you have. Your finances will determine what your options are. Meet with a lender to discuss your options.
Good luck,
0 votes Thank Flag Link Sat Apr 28, 2012
Hello Mike,
That's a great question, with many answers Mike !
It all depends what your plans are for the home,ie: investment, primary home, rental,etc.
That would help us to advice you as what type of loan that would be best for you!. Pls feel free to call me at 540 287-8750 I work with a highly motivated and experience team of lenders for all types of transactions Mike! Please give us the chance to help guide you to the best places for your needs Mike! I look forward to hearing from you!
Take care,
0 votes Thank Flag Link Sat Apr 28, 2012
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