Tag Archive for zero down home loan

Should First Time Home Buyers Borrow From Their 401K?

Should first time home buyers borrow their down payment from their 401K?  Many first time home buyers struggle to come up with a down payment to buy their first home.  Others have the minimum down payment, but would prefer to have a LARGER down payment to avoid mortgage insurance.  Borrowing against a 401K or other retirement plan may be a good option.

Doesn’t it make more sense to get down payment assistance?  Most down payment assistance programs are determined by your annual income.  Many of our first time home buyers find that they make too much money to be eligible to receive down payment assistance from the state.

But don’t you have to pay high fees for liquidating money from your retirement account?
  Generally speaking yes, so you want to BORROW AGAINST the account, not liquidate funds.  This will help you avoid penalties from the IRS for early withdraw.  Usually the money is paid back with interest, but the interest goes back into your account.  So essentially you’re acting like your own bank in this instance.

Would it be better to just wait and save for a down payment?  This depends on many different variables.  Some things to consider are: Will housing values and interest rates rise in the near future?  How long will it take me to save a down payment?  If it won’t take you any time at all to save, then you Piggy bank 401K and dollarprobably won’t be as concerned with rises in the market.  But if it may take you a year OR MORE to save, then borrowing from your 401K may be a really good alternative.

Are their any downsides to borrowing against my 401K?
  Not usually.  The Federal Government has allowed this type of transaction for first time home buyers to support home ownership across the country.  However, this doesn’t mean that your specific company doesn’t have other criteria you may need to meet to borrow against your retirement account.  So it is important to get all the details from your Human Resources department before making a final decision.

Don’t make the biggest decision of your life without getting educated!
  If you would like to find out more about the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer/Down Payment Assistance workshops.


What are USDA Loans?

What is a USDA loan anyway?  USDA loans are specifically designed for purchasing homes in rural areas.  Some of the areas in Western Washington that are considered rural by USDA guidelines may surprise you.  In many cases first time home buyers looking for the suburban lifestyle are finding themselves purchasing homes in areas that can utilize USDA financing.

So what are some benefits of using a USDA loan?  Well, USDA’s monthly mortgage insurance is only one third of what FHA’s monthly mortgage insurance premium is.  Also, the interest rate for a 30 year fixed loan is lower with USDA than it is with standard conventional financing.  Another huge benefit for many first time home buyers is that with USDA, you can secure that low rate and the low monthly mortgage insurance with absolutely NO down-payment.  That’s right $0 down, so you can keep more money in your pocket!

What else do I need to know about the USDA loan?  First off, there IS an up-front Mortgage insurance premium that will be added to the loan amount of your 30 year fixed loan.  This up-front mortgage insurance is 15% higher than the FHA’s premium.  The next thing to know is that the monthly mortgage insurance, like FHA, will last for the life of the loan.  An additional major factor to consider is that there is a household income limitation.  Bottom line, there are a lot of different factors to consider.

Don’t make one of the biggest financial decisions of your life without getting educated!  If you would like to gather more information about down payment options or the first time home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.


Do I Need a Down Payment to Buy My First Home?

I just read an article on CNN Money called “Secrets to getting a mortgage with so-so credit”. It had some interesting information about different lending parameters with major institutions like Fannie Mae, Freddie Mac and FHA. One of the guidelines listed in the article for Fannie and Freddie is a 20% down payment. I was a little confused by this, as from my experience you can generally secure one of these conventional type of loans with as little as 5% down. The article may have meant that “to secure the best interest rate” a borrower must put 20% down, which is true. The article goes on to say that if a borrower cannot afford this size of down payment, that FHA may be a better option with only a minimum down payment of 3.5%. Also, FHA allows for a much lower credit score than conventional loans without penalizing the borrower with a higher interest rate. Now may be a great time to buy your first home, but in this economy many families may struggle with the ability to save up a minimum down payment of 3.5%. If you’re interested in buying your first home, but even a 3.5% down payment seems out of your reach, there are also great down payment assistance programs offered by the Washington State Housing Finance Commission. First time home buyers (who haven’t owned a home in the last 3 years) may be eligible for up to $45,000 in down payment assistance from the state. You may be able to own your first home for little to no money down. If you would like to find out more about these down payment assistance programs, please go to our Calendar/Reservations page and register for one of our FREE First Time Home Buyer seminars.