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  • Government Mortgage Help for First Time Buyers

    11257109612Despite economic woes, there is now more government mortgage help for first  time buyers. The economic stimulus package included an infusion of money for state mortgage agencies to offer attractive rates to new homeowners. Programs in states like New York, New Jersey, and Connecticut are offering rates below those of conventional lenders, allowing new buyers to get loans they otherwise couldn’t.


    New York Low Interest Rate Program for First Time Buyers

    The State of New York Mortgage Agency (SONYMA) is offering first time buyers 30-year loans at 4.75% through their Low Interest Rate Program. In comparison, conventional lenders offer loans at around 5% to even their most qualified customers. While their Low Interest Rate Program is geared toward new homeowners, people who haven’t owned a home in the previous three years can also qualify. Low Interest Rate mortgages don’t require a minimum credit score, either, in contrast to the strict underwriting guidelines of conventional lenders. People can qualify with total monthly debt payments of 45% of monthly income and maybe even more. That’s 5% higher than most commercial lenders and well in excess of what financial counselors recommend.

    While that may seem ill-advised, SONYMA states that Low Interest Rate borrowers default less frequently than people with conventional mortgages. Partly this is because borrowers have to keep mortgage insurance, for which they pay monthly premiums. To qualify, prospective buyers can’t exceed certain income limits, which change by area, and the home cannot exceed a price of $637,640. The program’s low rates will likely rise if conventional mortgage rates rise, but SONYMA maintains that rates will likely stay about a half a percent lower than conventional mortgage rates. 732366_71605868

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    New Jersey’s Program for First Time Buyers
    Other states like New Jersey and Connecticut have already or are in the process of dropping their rates for new homeowners, as well. The New Jersey Housing and Mortgage Finance Agency plans to drop rates for first time buyers from 5.75% to 5% in early April. Since most loans with a down payment of less than 20% are insured by the Federal Housing Administration, buyers must abide by the FHA’s policies and purchase mortgage insurance. Income limits and purchase price limits also apply. Most new homeowners who have gotten low interest mortgage loans also qualify for assistance with down payments and closing costs, averaging $7,500.

    Connecticut’s Program for First Time Buyers
    Connecticut also offers government mortgage help for first time buyers. Its new homeowner program has the lowest mortgage rates, currently at 4.375%. The Connecticut Housing Finance Authority points out that people who want to purchase homes in federally-targeted urban areas don’t need to be new homeowners to qualify. Other states have similar provisions in their affordable-housing programs.

    People should note that brokers themselves might not offer these low interest mortgages. In New York, for example, lenders and brokers have to split New York’s commission payment, which makes brokers loathe to offer them. The big banks and many regional banks participate in the programs, however, so prospective buyers may need to contact them directly to take advantage.
    Demand for all three programs has been strong. Given that conventional lenders are requiring stricter standards of home buyers, new homeowners often don’t qualify. Yet it is possible to get state-based government mortgage help for first time buyers, so prospective homeowners should be sure to check state websites for information.

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