One of the biggest challenges most Virginia first-time home buyers face is coming up with their down payment.
An FHA loan exists in Virginia that can help stretch your home buying and down payment dollars. It allows for a $0 down payment and ony 1% of the sales price is needed in total participation for qualified Virginia first-time home buyers.
FHA is one of the few remaining loan programs that allows for a relatively small down payment…as little as 3.5% down compared to conventional financing which usually requires down payments of at least 5% or more. On a $250,000 sales price with an FHA loan, you would need to put down $8,750 compared to the $12,500 you need on a conventional loan at 5% down. That’s a pretty nice savings of $3,750 by using the FHA loan, isn’t it?
Well what if you could purchase that same $250,000 with $0 down?
The Virginia Housing Development Authority’s (VHDA) financed FHA Plus loan allows you to purchase with $0 down. A qualified borrower only needs to have 1% of the sales price available. So in our $250,000 sales price example, that means you would only need to have $2,500 instead of the typical $8,750 for a standard FHA loan.
How does it work?
The VHDA FHA Plus program starts with an FHA-fixed first trust mortgage. It is structured with the typical 3.5% down payment to arrive at the standard first trust loan amount. But, it also includes a second trust mortgage of up to 5% of the sales price designed to help qualified borrowers with their down payment and closing costs. The first 3.5% of that 5% second trust goes to the down payment. That leaves another 1.5% to help pay closing costs.
Another great feature of this program is that it allows many of the same flexible benefits of standard FHA financing…which includes allowing a seller to pay up to 6% of the sales price towards a borrower’s closing costs. So by using the FHA Plus loan, the second trust pays the down payment and 1.5% of the closing costs as described above and still allows a willing seller to pay your remaining closing costs (not to exceed 6% of the sales price).
If you can get the seller to help, you would only need to show that you have $2,500 total in our $250,000 sale price example. Everything else would be covered! Imagine buying a $250,000 home and only needing $2,500 dollars!!
This program is for Virginia first-time homebuyers…income and sales price limits apply as do minimum credit scores. Completing a first-time home buyer education course is required. And because this programs allows such a small investment on the part of the borrower, the qualifying ratios are a bit more restrictive. That is a small price to pay to buy a home with so few dollars as compared to other loan programs.
It is also important to know that this is not one of those funky no money down loans that everyone has been talking about. VHDA FHA Plus financing provides stable, low fixed rate loans. And the interest rate on the second trust is the same as the interest rate on the first trust. That makes the total mortgage payment affordable and stable. An affordable, stable mortgage payment with only 1% of the sales price needed?? What an advantage for Virginia first-time homebuyers.
Finally, you can purchase a home using this program and still take advantage of the $8,000 First-Time Home Buyer Tax Credit. It is the best of all worlds. With interest rates still at all time lows and Real Estate at incredibly low prices in the Alexandria, Arlington and Fairfax markets in Northern Virginia…now is the absolute best time to buy. And don’t forget that the Tax Credit will expire if you do not have a contract in place by April 30th, 2010. So what are you waiting for???
Want to know if you can qualify?
I would be happy to answer any of your questions. Feel free to call me at 703-621-7895 or email me at csmall@union-mtg.com.
