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Down Payment Money Pitfalls

By
Real Estate Agent with Star Team Realty

The good news is that Down Payment Money is still available to many first time buyers.  The bad news is the hoops you have to go through for some of these programs.  You have to be careful when choosing and sending your buyer to apply for one of these programs.  You need to know what the expectations are for the local programs and Federal Program.

The biggest plus for the Federal Neighborhood Stabalization Program is the high income they will accept.  The buyer can have a maximum income of about $63,240 for a family.  Much higher income limits than most local programs will accept.  The Federal program will take all foreclosure properties up to the FHA limit in your area. 

The big PITFALL with the Federal program is the property must be purchased a 15% BELOW the market value.  This is very tricky since the sellers/banks usually have discounted the property below the market value.  Banks have been reluctant to do more discounting.  This will cost the buyer, usually the buyer must pay the appraisal upfront and there is no way to quarantee the 15% BELOW market value.  The buyer is using their reserve money to pay for this appraisal with no way of knowing the purchase price will meet the guidelines.

The second PITFALL of the Federal program is the buyer must attend an 8 hour class.  This class is only offered by some approved groups.  These classes fill up quickly and the buyer may have several months delay before they can attend.  Buyers become discouraged and give up once they encouter all these hoops.

Local programs usually have some requirements but the two above are removed.  The buyer must qualify for a loan to apply.  Each buyer also has individual counseling done on a 1 to 1 basis. 

The biggest local program PITFALL is the maximum income is limited to much less than the Federal Program.

The second local program PITFALL is only some cities or counties offer the local programs and so the buyer is limited in location.

The third local program PITFALL is that some require a minimum amount of down payment from the buyer, about $1000 before they can apply.

 

Laura Kostyo has been in real estate and mortgages for 20 years.  To contact her directly please call 480-694-8807