Owning a home is a dream every American shares which is why the Cherry Hills Colorado real estate market sees so much action. The sense of belonging and security that living in one’s own home is what drives many people to look for easy ways to become home owners. With the recession and slump in real estate, owning a home continues to remain just slightly out of reach with saving the money for a down payment becoming the biggest obstacle.
20 years ago, the average down payment for a house was 20%. However, it’s common for people today to put as little as four percent down on their new home. This is all thanks to “low down payment mortgages” as they are called. Some of the options available include:
- The most popular loan is one from the FHA (Federal Housing Administration). This is a mortgage that only requires a down payment of 3.5%. Please note that you will have to pay Private Mortgage Insurance (PMI) on any loan with less that 20% equity in the home loan. However, mortgage programs like Smart PMI allow you to lower costly mortgage insurance. By only paying a part of your PMI right at the beginning, as the down payment, you can lower a significant amount of your PMI every month all through your repayment tenure.
- Please check with your banker if you meet certain criteria which can eliminate PMI after they’ve reached a predetermined level of equity in the home. This amount, however, varies based on the loan type, but commonly is between about 20 to 22 percent. By law, lenders are required to stop PMI when the owner has reached about 22% equity in their purchased home only if the loan taken was closed on or after 29 July, 1999.
- There are also interest only loans that allow the home buyer to pay only the interest on the loan for a period of time. The rates vary and are adjustable mortgages that allow the buyer to put only a small amount down, or sometimes nothing at all.
- Some programs allow the buyer to take out a mortgage, and then turn around and take out a second mortgage to cover the cost of the down payment. A few such programs are more risky than some others, but the advantage is that they allow the potential homeowner to purchase a home with no down payment at all.
To be considered for a low down payment loan, you generally need to:
- Have a high enough salary to be able to make the monthly payments
- Have enough cash for the down payment.
- Ensure that you have enough surplus cash to cover the normal closing costs associated with buying a home
- Work at keeping your credit history clean by not missing out on credit card payments etc.
- Helps to have cash reserve equal to two monthly mortgage payments in case of unforeseen emergencies.
With such options available buying a home has become fairly easy. This has significantly increased the number of people looking to buy homes in cities like Denver CO and Erie Colorado where there are some of the finest properties up for sale.
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