With the exception of a few down payment assistance programs and city-specific programs, there are no effective first time buyer programs other than good old fashioned FHA.
JVM has access to various first time buyer programs, but they have significant limitations and borrowers rarely, if ever, end up using them.
LIMITATIONS OF FIRST TIME HOMEBUYER PROGRAMS
Here are some of the first time homebuyer limitations:
1. High Interest Rates. Some of the down payment assistance programs come with such high interest rates that borrowers are simply better off getting FHA financing with a lender credit for closing costs (explained below).
2. Slow closing periods. While we can close a standard FHA transaction in 14 days, we need 30 days at least to close a homebuyer assistance program b/c of the extra paperwork and signatures required. In competitive markets, many sellers will not accept offers involving homebuyer assistance programs.
3. Income limits. This is the biggie. Most of the programs have eligibility requirements, including income limits. And most borrowers earn too much to qualify for the programs, which are intended to help the less fortunate.
4. Inventory/Geography limits. Many of the city-specific programs are limited to specific projects or specific financing options, and supply often vastly exceeds demand. Buyers need to be lucky enough to win a lottery in many cases in order to take advantage of the programs.
WHY WE RECOMMEND FHA
For qualified first time homebuyers, looking to make competitive offers in a variety of areas, we usually recommend FHA financing with 3.5% down and a lender credit for closing costs if cash is tight.
LENDER CREDIT FOR CASH STARVED BUYERS
B/c FHA interest rates are so low, we can increase the interest rate and offer substantial lender credits for most or all of a buyer’s closing costs (and still offer a relatively low rate). In contrast, with many down payment assistance programs, the rates are too high for us to offer lender credits for closing costs. So all savings from the down payment assistance program often end up going towards closing costs.
GIFTS FOR DOWN PAYMENT
FHA only requires 3.5% of the purchase price for a down payment, and all of that money can be a gift from a relative.
FHA VERY FLEXIBLE & FAST
FHA is simply very flexible overall, on all fronts, with respect to credit, gift funds, debt ratios, lender credits, and interest rates. We love FHA, and we can easily close FHA transactions in 14 days. Further, we are happy to call listing agents to explain all of this.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
