I want to buy a home but am considered low income. Is it worth going to a Home Buyers Expo in my town?

Question

I heard that there are organizations that can help pay closing costs and offer grants for first time homebuyers of low income. I just read in the local paper that there will be a home buyers expo this next Saturday. It says ther will be a topic on buyers assistance programs. Is there a chance that they might help me or is it just a waste of time?

Answer 1

It is never a waste of time to learn. Even if you do not qualify, go there to learn more about the system. All the information you gather will help you make better and informed choices later on in life.

So don't get your hopes up that you will get a home. However, do get your hopes up that you may learn a lot more than what you know now.

Good Luck!

Answer 2

Its a definite benefit to check out all your avenues.  Another thing to look into is through your county.  Low income, single mothers, and getting low, low, interest loans.

There is another program that I've run into and it helps low income families get loans as long as you pay back with volunteer work in the community.

Answer 3

Definately, they will help you and if you can make the payment now is definately the time to buy. It will help the owner and you all in the same. Just make sure to negotiate a little and do not take the dollar amount. It is a hard market for sellers so you have the power to negotiate. The first time homebuyers is a really great program and yes, it does help with paying the closing costs. There is lots of help out there...if you can just get a normal house loan do that first but if not there are other optional loans from H.U.D or F.H.A that you will definately be able to qualify for. Good Luck and it just does not hurt to go and inquire.

Answer 4

If will not Must you to learn how to learn how to manage yourfinances and meet certain requirement in the future.

Answer 5

There are many possible answers to your question, so please forgive the length of this.  Just bear with me:

The real answer is - it depends.  It depends on "How much you gross in a month" vs "How much you spend in a month".  This ratio of "Income vs Debt" per month is called a Debt-To-Income ratio, or simply DTI for short.  I'll show you how to calculate DTI later on in this answer.

Generally speaking, first time homebuyers can find grants and/or forgiveable loans at the state level or the municipal levels of your local government.  In fact, some cities will offer incentives to move into certain areas of town.  Most lenders will be unaware of these, so you will have to call around to the counties or cities in which you are interested to find out for yourself.  

However, there are ways to get $0 out-of-pocket loans that don't require assistance programs from your local government.  Here are two other possibilities:

If you are a veteran of any branch of the US military, you need to get a Certificate of Eligibility from the VA, and with this document you can get a $0 down loan that is guaranteed by the VA against default.  You will probably need to do this kind of loan through a larger bank, as most mortgage brokers are not qualified to originate a VA loan.  And in all likelihood, a VA loan will allow the seller to pay for most or all of your closing costs.  Using a VA loan, you might literally be able to get a home without a single dime out of pocket, assuming that the home appraises for a sufficiently high value.

If you are not a veteran, or cannot otherwise get a VA loan, you might consider an FHA loan.  Like a VA loan, this is a loan that is backed by the federal government, but rather than guaranteeing it as a VA loan would do, an FHA loan "insures" against default.  You, the buyer, would pay that insurance premium on top of your regular house payment every month.  Most FHA programs require a 3% down payment, but virtually all lenders are aware of non-profit organizations that can help make the down payment for you at settlement.  And FHA loans have one more similarity to VA loans in that they will normally allow the seller to pay most or all of your closing costs for you, again setting up the possibility of you walking out of settlement with a new home and $0 out of pocket.

A word of warning is called for here:  Remember that by paying $0 out of pocket your monthly payments will very likely be slightly higher over the life of your loan.

My best advice to you is to shop among at least 3 reputable lenders in your area for the type of loan that is best for you.  Let them know that you are shopping, and that you will show all of your Truth-In-Lending statements and Good Faith Estimates to all of them.  If they don't want you to do this, then find another lender who is alright with it.

Compare the APR on the Truth-In-Lending statement (top left corner of the form) from each lender.  This is what you are really paying for the loan.  It includes your interest rate + some of the costs of the loan itself, all rolled into one number, the APR.

Another word of advice:  No matter how much you pay (or don't pay, as the case may be) for your down payment and closing costs, the lender will want to know how well your monthly income stacks up against your monthly debt payments.

In finding these numbers, your lender is only interested in consumer debt monthly payments, in other words, those that have a contract and/or an interest rate attached to them.  So for example, your car payments and your credit card payments would be considered consumer debt, but your utility bills and taxes would not be part of these numbers.

Remember when we referenced Debt-To-Income ratio (DTI) a few moments ago?  

Any lender you use will probably calculate two different DTIs, one called the "front end" DTI, and the other called the "back end" DTI.  Here's how they work.

The front end DTI is simply a matter of dividing your proposed house payment (i.e. principal, interest, taxes & insurance) by your gross monthly income.

To wit:    (monthly income)/(proposed monthly house payment) = front end DTI

So for example, if my proposed monthly house payment is a total of $1,500 (be sure to include taxes & insurance in this number), and my monthly gross income is $5,000, then my front end DTI looks like this:

$1,500/$5,000 = 30%.

FHA loans look for a front end DTI of 31% or less.

The back end DTI looks more complex, but it really isn't.  There's just one extra step.  

Step 1) Add together all of your consumer debt (car, credit cards, etc) together with your proposed monthly house payment.

Step 2) Divide that number by your gross monthly income.

Again by way of example, let's suppose that my proposed monthly house payment is $1,500, and that my monthly bills are $600 ($400 car payment and $200 credit cards).  So I just add $1,500 and $600 together for a total of $2,100 dollars in monthly consumer debt that I will have if I get this loan.  

Now you just divide $2,100 by your monthly income.  Again, let's suppose that my monthly gross is $5,000.  So it looks like this:

$2,100/$5,000 = 42%.

FHA loans aim for 43% or less on the back end ratio.

Different types of loans will have different requirements for the back and front end DTI numbers, so don't be surprised if the numbers are slightly different from what I've shown you here.

Your lender will also want to see your credit report from all three credit bureaus (Equifax, Experian, TransUnion).  Your credit scores will be different from each credit bureau.  So how does your lender know which one to use?  Your lender will probably use the middle score, no matter which bureau it is from.  So if your scores were 680 715 and 675, then 680 would be your score, because it's the middle one.

It's much harder to get credit now than it was in the recent past.  Make sure that any collections that you might have open get paid off as soon as possible.  Also make sure that you pay your rent on time, and that there is some sort of record of those payments, preferably the ledger of a professional property management company.  

There's much more to this, but my answer to you is already too long.

Good luck!  And shop at least 3 good lenders against each other.  Get their advice, and go with the one that fits your needs the best.