Down payments, appraisal and inspection fees, closing costs, as well as qualifying for a mortgage – all those things may make you think buying a home is beyond your reach. You probably can realize your dream, though, because there are numerous programs for first-time buyers in Richmond. These programs are designed to help low- to moderate-income first time home buyers, even those who have shaky credit scores. There are also programs aimed at assisting first time buyers in certain professions, such as the military, law enforcement, and education. So let’s take a look.
Many people aren’t aware that the U.S. Department of Agriculture (USDA) guarantees loans for some rural homes that meet their criteria, including the possibility of 100% financing. And, no, you don’t have to start farming or raising cattle – you just have to buy a home in an eligible area.
These loans do have income limits so not everyone can qualify. They are for people with low to moderate incomes based on incomes for that particular area. To qualify for a USDA streamlined loan, you will typically have to have a credit score of 640 or better. If your score is below that, you may still be in the running. You’ll just have to provide more documentation and more proof to verify your payment history.
Another of the important programs for first-time buyers in Richmond is the Federal Housing Administration (FHA) loan. These loans are aimed primarily at assisting people who simply don’t have the ready cash for a hefty down payment and/or who have a credit record that is less than great. So an FHA loan is often a great option if you can come up with only a small down payment and have a lower credit score. The standard for FHA loans is a 3.5% down payment with a minimum score of 580 and 10% with a score between 500 and 579.
You do need to be aware that with this lower down payment you will have to pay for private mortgage insurance (PMI), usually paying an upfront premium along with annual premiums. The purpose of PMI is to protect the lender in case the borrower defaults on the loan. Still, for many who don’t have a bunch of cash for a down payment, it offers a way to buy a home.
The U.S. Department of Veterans Affairs (VA) offers home loans for many members of the US military, both active duty and veterans. So if you are military, this is definitely one of the programs for first-time buyers to look into because these loans often come with no down payment and low-interest rates.
Although VA loans carry a funding fee, it can be rolled into the loan costs, and certain members of the military may be exempt. In addition, such loans don’t require you to carry PMI, and there is usually no minimum credit score requirement. And if you find yourself struggling to make mortgage payments, the VA can work with the lender to smooth things out.
Fannie Mae and Freddie Mac
These may be funny names, but they are good programs for first-time buyers in Richmond. Fannie Mae and Freddy Mac are government-sponsored entities with the purpose of keeping the US mortgage market strong. They are called, then, government-sponsored enterprises (GSEs), and they buy certain loans from conventional lenders on what is called the “secondary mortgage market.”
Both Fannie Mae and Freddy Mac require you to have a minimum 3% down payment, as well as a 620 minimum credit score. (The exact score will depend on the particular lender.) You will also need a fairly spotless credit and payment history – for example, a history of paying bills on time. The really good news is that Fannie Mae will accept a debt-to-income ratio as high as 50%, which is much higher than the standard of around 36%. Because you pay less than 20% down, you will have to pay for PMI.
So with these programs for first-time buyers in Richmond, you really can realize your dream of owning your own home. If, however, you don’t qualify for any of these programs, you still have options.