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Buying a House

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Home Buying Overview

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Mortgage Payments

03

Steps to Buying

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Financial Help & References

Financial Programs for First Timers

There is a lot to consider when buying a home – you’re starting to see the complicated picture. Besides traditional loans, there are also some additional options that might be appealing to you and your unique situation. If this is your first home purchase, here are some additional options and resources you should look into:

  • FHA Loan. In an FHA loan, the Federal Housing Administration insures the mortgage, meaning that your lender won’t experience a loss if you default on the mortgage. FHA loans typically come with competitive interest rates, smaller down payments and lower closing costs than conventional loans. If you have a credit score of 580 or higher, you could be eligible for a mortgage with a down payment as low as 3.5 percent of the purchase price. If your credit score is lower than 580, you still might qualify for an FHA mortgage, but the down payment would be at least 10 percent of the purchase amount.
  • USDA Loan. While not well known, the U.S. Department of Agriculture (USDA) has a homebuyer assistance program. While the program focuses on homes in certain rural areas, you don’t need to buy or run a farm to be eligible. The USDA guarantees the home loan. There may be no down payment required, and the loan payments are fixed. Applicants with a credit score of 640 or higher typically get streamlined processing. With a credit score below 640, you still can qualify for a USDA loan, but the lender will ask for extra documentation about your payment history. Keep in mind that there are income limitations, which can vary by region.
  • VA Loan. The U.S. Department of Veterans Affairs (VA) helps active-duty military members, veterans and surviving spouses buy homes. The VA guarantees part of the loan, making it possible for lenders to offer some special features. VA loans come with competitive interest rates and require no down payment. You aren’t required to pay for private mortgage insurance (PMI), and a minimum credit score isn’t needed for eligibility. If it becomes difficult to make payments on the mortgage, the VA can negotiate with the lender on your behalf.
  • Good Neighbor Next Door. The Good Neighbor Next Door program, sponsored by HUD, provides housing aid for law enforcement officers, firefighters, emergency medical technicians and prekindergarten through 12th-grade teachers. Through this program, you can receive a discount of 50 percent on a home’s listed price in regions known as “revitalization areas.” You must commit to living in the home for at least 36 months.
  • Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored entities. They work with local lenders to offer mortgage options that benefit low- and moderate-income families. With the backing of Fannie Mae and Freddie Mac, lenders can offer competitive interest rates and accept down payments as low as 3 percent of the purchase price. Fannie Mae also provides homeownership education for first-time homebuyers through its “HomePath Ready Buyer” program.
  • Energy-efficient Mortgage (EEM). An energy-efficient, or “green,” mortgage is designed to help you add improvements to your home to make it more environmentally friendly. The federal government supports EEM loans by insuring them through the FHA or VA programs. The key advantage of this mortgage is that it lets you create an energy-efficient home without having to make a larger down payment. The extra cost is rolled into your primary loan. Some improvements you can make include installing double-paned windows, new insulation or a modern heating-and-cooling system.
  • FHA Section 203(k). If you’ve run the numbers to see how much house you can afford and have determined a fixerupper is best for your budget, the Section 203(k) rehabilitation program may be a good fit. This type of loan, backed by the FHA, takes into consideration the value of the residence after improvements have been made. It then lets you borrow the funds you’ll need to carry out the project and includes them in your main mortgage. The down payment for a 203(k) loan can be as low as 3 percent.
  • Native American Direct Loan. Since 1992, the Native American Veteran Direct Loan program has helped Native American veterans and their spouses buy homes on federal trust lands. The VA serves as the lender. If you’re eligible, you won’t be required to make a down payment or pay for private mortgage insurance (PMI). This first-time homebuyer loan also offers low closing costs and a 30-year fixed-rate mortgage.
  • Local Grants and Programs. In addition to the various programs provided by the federal government, many states and cities offer help to first-time homebuyers. Before buying a home, check your state’s or community’s website for information on housing grants and programs available in your area. You also might consider contacting a real estate agent or local HUD-approved housing counseling agency to learn more about programs in your area that might apply to your situation.

Did You Know

The Midwest may be the best place for single and unmarried women to buy a new home, followed by Texas and upstate New York.

Assistance for Single Parents

Buying a home as a single parent can be an expensive undertaking but know there are assistance programs that can help you with the dream of homeownership. Take a look through these resources and do some investigation to see if you qualify for assistance.

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Your Local Housing Authority. Before you look for national home-buying programs, find out what specific homeownership programs may be available to you right in your own state. To do this, you need to visit the website of your state's local housing authority, which you can find through the Public Housing Authorities Director's Association.

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HUD (Housing and Urban Development) Counselor. Your local HUD office has resources that can help, and one of those resources is the opportunity to work with a professional counselor trained to help you find housing options in your area. A HUD housing counselor can answer your questions about the home buying process, obtaining a mortgage, and more. He or she may also be able to tell you about various home buying programs in your area, including some lesser-known programs.

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HUD Property. HUD sells properties in every state in the U.S. You can learn more about HUD properties by visiting the HUD website and searching for homes available for sale in your state. Be aware, though, that some of the properties available through HUD may be in less desirable neighborhoods, so be sure to do your homework and really get to know the area before you make an investment.

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Habitat for Humanity. Habitat for Humanity builds homes for families in need, and they're one of the most well-known organizations offering practical financial support to single parents. If you want to be added their list as a potential homeowner, start by becoming familiar with the criteria they use to select homeowners.

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Individual Development Account (IDA). An Individual Development Account is a matched savings account, usually set up by a community organization, for the purpose of helping low to mid income families save money toward the purchase of a home, education costs, or financing a small business. In some cases, organizations that offer IDAs will match your savings dollar for dollar. You can find out which organizations in your area offer IDAs through the Corporation for Economic Development. Be sure to pay attention to the fine print.

Your Home and Divorce

Divorce is difficult and one of the biggest decision is what to do with the largest asset shared, the home. Should you keep it or move on? There are numerous pros and cons to both decisions. Here is a breakdown of both sides of the argument. It’s important to look at this decision from a financial standpoint as the expenses to care and maintain for a home may exceed your income.

REASONS TO KEEP THE HOUSE IN YOUR DIVORCE:

  • Chances are, you will have less money when you divorce. If you’re forced to leave the home, you will likely move to smaller, possibly less desirable digs.
  • The home is the biggest financial asset for most couples. If you walk away from that, you may lose a lot of assets — even if he buys you out. Why? Because your household income will be lower in the short-term, the tax write-offs like mortgage interest and property taxes will be even more valuable post-divorce.
  • The house provides a measure of stability for you and your kids during a tumultuous time. This includes staying in the same schools and close to friends and neighbors who provided emotional and practical support.
  • If you do decide to sell your home, you can likely pocket most or all of the profits tax-free. Only a few investment vehicles provide such a tax perk.

REASONS NOT TO KEEP THE HOUSE IN YOUR DIVORCE:

  • You can’t afford it. Your total household income is lower after divorce, and having too much house for your new financial situation can lead to debt and financial stress.
  • Selling helps you move on. There is nothing like new real estate (and furnishings) to relaunch your new life, and put your old one behind you.
  • A new home is empowering! Whether you are purchasing a new house or renting a place on your own, doing this solo can be very empowering.
  • It could teach your kids financial responsibility. Because your home is likely your biggest financial asset, you should treat it with as little emotion as possible.
  • Compromising your finances, emotional well-being and good sense for the sake of keeping a house is not a good financial example for your kids. Selling might teach your children emotional resistance.

References

1. Source: https://smartasset.com/mortgage/rent-vs-buy

2. Source: https://www.thebalance.com/single-women-buy-homes-too-1798358

3. Source: http://articles.chicagotribune.com/1994-12-04/news/9412040348_1_spinster-woman-word

4. Source: https://www.usatoday.com/story/money/2017/09/18/hey-single-ladies-heres-where-you-should-live/671360001/

5. Source: https://www.zillow.com/mortgage-calculator/debt-to-income-calculator/

6. Source: https://communications.fidelity.com/pi/calculators/housing/

7. Source: https://www.zillow.com/mortgage-calculator/house-affordability/

8. Source: https://www.wikipedia.org/

9. Source: https://www.quickenloans.com/blog/10-tips-single-women-looking-buy-home

10. Source: https://www.bankrate.com/mortgages/first-time-homebuyer-grants-and-programs/

11. Source: https://prosperitynow.org/issues/individual-development-accounts

12. Source: https://www.wealthysinglemommy.com/women-dont-be-stupid-keep-the-house-in-the- divorce/

This Guide

01

Buying a House Part 1 - Home Buying Overview

02

Buying a House Part 2 - Mortgage Payments

03

Buying a House Part 3 - Steps to Buying

04

Buying a House Part 4 - Financial Help & References

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