There are a growing number of home buyers who have found free money to buy a home. These are grant-loans offered by the Community Development Corps (CDC's) which are local government agencies specifically designed to help low income families purchase their first home. Some CDC's even allow previous homeowners to get into the program.
Many local governments have started home loan subsidy programs for emergency workers (EMS, Police, hospital workers, etc.) so they can purchase affordable housing on their city or county salaries. These same governments have also extended the funding to the public to qualified buyers. Their funding is allocated by the city, county or state government and is unpredictable because of funding crises in local and state governments.
If you would like to apply for a loan, you should begin immediately to get qualified because there is usually an educational program associated with the loan. While only loans are mentioned previously, many of the funds disbursed are actually grants and not meant to be paid back. Most carry guidelines that must be strictly adhered to so that the loan becomes a grant and does not have to be repaid after a number of years. The loans are never transferable to someone buying the home, even if they are qualified in the CDC program. There are seldom pre-payment penalties, but remember, if the loan is kept for a certain term, there may be no repayment required.
The amount of the funding varies and is determined by the need of the applicant, the expected purchase price of the home, and most importantly, the amount of the funding the CDC gets. Typically, it is quoted to the perspective homeowner in a flat dollar amount, such as $40,000, which will be about 20% of the purchase price of a home for which the applicant qualifies. Sometimes the applicant can also apply for repair monies, usually about $5,000.
The applicant must look for a home to buy while waiting for his funding. His competition is other home buyers that can get conventional financing, so the process of finding a home can be frustrating. An issue of the loan process is that it usually takes 60 days, once a purchase contract has been signed. This unusually long closing time is a hardship on the buyer and seller, but seems to matter little to the CDC. Often time's sellers would rather sell at a lower price rather than waiting for the uncertainty of the CDC funding.
The CDC also requires that the applicant get pre-qualified by a lender for the difference of the grant money and what is owed to purchase the home. It is important that the applicant uses a commercial bank as a lender because a mortgage broker may put part of his commission on the "backend" of the loan, often resulting in a higher interest rate. Most CDC's have a maximum interest rate the borrower can pay, so this could kill the purchase. However, there is an industry secret to overcome this which is to have the seller "buy-down" the interest rate of the loan by giving the lender a set amount at the closing as part of the closing costs. The larger this amount, the lower the interest rate for the buyer.
The CDC loan process may be intentionally complicated so that the number of applicants remaining after the elimination process includes only the strongest. Expect many requirements to change throughout the loan process and before closing. This is very annoying, but ask yourself this, "Who else is willing to gift you with $40,000?" Do whatever is asked even if you don't understand why, or if you have done it before, because there are probably ten people behind you waiting for the same funding. Persistence and perseverance is the key to owning your own home and having the government pay for a big portion of it.
Before you buy a home it is important to get your financing in order. Your first call should be to a loan officer. Find a good loan officer that maybe a friend or Realtor can recommend. Make sure they are a mortgage broker so they have thousands of options to choose from. You don't want to limit yourself to a bank that only does ?in-house? loans. Be honest with your loan officer and tell them your monthly debt and income. Talk openly about your credit, they are there to assist you.
Once you work out how much you can afford it is wise to contact a realtor. A realtor will help guide you if you tell him or her your needs. There are a vast array of real estate companies, but it is important to remember that real estate agents are self employed. Every brokerage will have it's good and not so good agents. The number one quality to seek for in an agent is honesty. I can not emphasize that enough. Find an agent who is looking out for your needs. It is an agents fiduciary obligations to protect you as a buyer. Make sure he is going to by finding out more about the agent's character.
There are many websites you can look up homes on to familiarize yourself with the areas you are considering. The major websites take a few days to post the newest listings. Look for a website the updates as soon as homes are placed on the market. The best deals are snatched up right away. Your real estate agent will have access to the homes that come on the market right away. Your agent will be your best resource. Make sure and ask your Realtor what his or her recommendations are.
Once you find a home, your real estate agent will take your pre-approval from when you first spoke with your loan officer and the agent will submit the offer to the listing agent. Upon acceptance escrow will be opened and you will need to turn in your earnest money. Every state is different on the the amount of earnest money usually is. Arizona is typically around 1 percent. No more money will be due until the close of escrow as far as payment to the house is concerned. You will still have inspections and an appraisal fee. Usually inspectors charge a few hundred dollars and the appraisal is usually a few hundred dollars itself.
In most cases after your inspection period and after you are qualified for the loan, your earnest money goes "hard" and is non-refundable. During this escrow period your loan officer will be putting together the docs necessary to close escrow. The title company or lawyer you are working with will be doing a title search to make sure there are no recorded liens or clouds on the title. Your job is just to turn in the necessary paper work when asked by your loan officer or real estate agent.
Once it comes time to close on your home your title company, lawyer, or realtor will schedule an appointment with you to sign docs. When you sign docs make sure and review them, sometimes there is an added addendum to the contract that the other party may have added. It is wise to have your realtor accompany you to a closing. You will bring the check for the down payment and to cover closing costs fees at that time. Usually within 48 hours the title company will record the documents and the house will be yours. Collect the keys and move in.
This is just the basics to get you started. Make sure and consult a realtor who will fill you in on the details. There is a lot of paper work and processes that your agent will know about specific to your state.
Both Dave Dinkel & Bill Cotter are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Dave Dinkel has sinced written about articles on various topics from Foreclosure Help, Internet Marketing and Advertising Guide. About:Dave Dinkel has over 30 years experience in real estate investing which has given him a unique perspective into the workings of the real estate market. He has developed a CD entitled "How to Sell Your Home in as Little as 72 Hours", available at. Dave Dinkel's top article generates over 33100 views. to your Favourites.
Bill Cotter has sinced written about articles on various topics from Wedding Speeches, Marriage and Real Estate. From . Bill Cotter's top article generates over 49500 views. to your Favourites.