Buying an affordable home – Lansing State Journal


Owning a home has always been considered part of achieving “the American Dream,� but for families with a lower-income, this goal can seem unachievable. While you may think you will be stuck renting forever, think again. There are actually several options out there that can help you achieve that dream of homeownership.

Kannon Kares, senior loan officer with Bay Equity Home Loans, says that first and foremost, potential buyers need to get over some of the common misconceptions.

“I still see many people that are under the assumption they need 20 percent down and a perfect credit score in order to purchase a home,� he said. “Not only are there some conventional loan options, but there are some amazing federal loan programs that can help low-income buyers get into a home for possibly less than they are paying in rent.�

Kares says that actually three out of every five mortgages in the U.S. are government backed, whether it’s FHA, UDSA, or VA.

FHA loans

The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), has been insuring loans throughout the U.S. since 1934. An FHA loan can be more forgiving with credit scores, and can potentially offer you a chance to get into a home with a lower interest rate and a lower down payment, as low as 3.5 percent.

On FHA loans, the minimum credit score is 580, and they are a bit more forgiving when it comes to other blemishes on your credit. For instance, if you’ve filed for bankruptcy, you may be approved for an FHA loan after two years from the discharge date of the bankruptcy. With most conventional loans, you will need to wait at least four years.

USDA loans

The United State Department of Agriculture (USDA) provides a path to homeownership for buyers in rural areas through its Rural Development loan program. The agency provides a couple of different mortgage plans — the Guaranteed Loan and the Direct Loan — neither of which requires a down payment.

VA loans

The Veterans Affairs (VA) loan program offers significant benefits to veterans and military families who otherwise might not be able to secure financing. The biggest advantages of a VA loan are that qualified buyers are able to buy a home with virtually no money down and they are able to do so without the penalty of private mortgage insurance (PMI). This feature is different to other government-backed loans, like FHA and USDA, which both enforce PMI.

VA loans also typically offer lower interest rates, and the VA limits what veterans are charged as far as mortgage fees and closing costs, so borrowers will typically find some savings there as well.

“There are different qualification requirements and guidelines for each of these programs, so my advice would be to set up a free consultation with an experienced lender,� said Kares. “I have talked with many clients who have been surprised at what they were actually able to qualify for and afford.�

Other savings options

Mitch Crank, REALTOR® with CENTURY 21 Looking Glass, says there are also some city and state programs that can help low-income families get into a home of their own. He further shared that the programs change depending on funding and other considerations, so it’s important to speak with real estate and lending professionals to be certain buyers know what options are currently available. Examples of recent programs include those offered by The Ingham County Land Bank.

“The Ingham County Land Bank is a federally funded nonprofit that takes tax-foreclosed properties, renovates them, puts them back into use, selling them for as little as 1 percent down,� said Crank. “Based on your income and need, the city even gives you 10-20 percent as a down payment, so you immediately walk into the home with equity.�

Like any program, there are stipulations to qualify for an Ingham County Land Bank home, so you will want to discuss this option with your REALTOR®.

There are also city, state, and sometimes employer down payment assistance programs available. For instance, the City of Lansing has a program that requires buyers to contribute $500 of their personal funds toward the purchase of a home. Through this program, buyers also qualify for up to 6 percent in forgivable down payment assistance.

The State of Michigan, through the Michigan State Housing Development Authority (MSHDA), offers up to $7500 in down payment assistance with minimal contributions required from buyers.

Crank says when looking to save money, you can also ask the seller to pay up to 6 percent of your lender approved prepaid expenses and closing costs, and you can also use gift money as part of your down payment as long as you show a record of where they money came from.

With so many options, Crank suggests reaching out to local experts like those at the Center for Financial Health in Lansing, which offers a homebuyer education class, and a� 60-day challenge� that helps buyers focus on their overall financial health and set goals to move them toward homeownership.

“They provide strategic recommendations and tactical advice to get you on the right path to homeownership,� he said. “I have literally seen clients cry with happiness because they never thought they could actually own a home. There are some great programs out there, it’s just a matter of finding the right option for you and your family.�

If you have a dream of owning your own home and would like more information, visit the Greater Lansing Association of REALTOR®’s website at www.lansing-realestate.com for a listing of experienced area REALTORS® and mortgage professionals.

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