First Time Home Buyer Loans - What's the catch?

Some banks will offer no-MI loans to their good customers, because they will not sell the loan and keep it in their portfolio, so they can decide to insure it or not. They will not be able to sell it in the secondary market without MI.

The "catch" is that with such a low down payment, your montly payment will be higher to amortize it. They might be offering an adjustable rate or graduated payment loan to keep your payments lower in the early years but increasing later, but they will still be required qualify you on a fully indexed payment (worst case or highest rate) to assure that you will have the ability to repay.

Finally, they might be utilizing a bond program, where some local or state agency is providing you with a second lien loan for the down payment assistance. That second lien could be a low- or no-interest loan, may or may not require payments on its own, and is repaid when you sell the home later. But those are usually quite small, maybe 3,000 to 5,000 max.

This offer definitely has a lot of fine print, so you are wise to know that there is never a free lunch. Without actually applying, you can talk to one of their loan officers to have the deal explained to you. You know that no lender is going to make a loan to lose money, so there is profit in there for them somewhere (to which they are entitled, otherwise why be in business?).

If you have a link to their advertisement, we might be able to find and analyze the fine print.

It's probably an adjustable rate mortgage, but not necessarily. The bank may say $1,000 down, but are they counting closing costs? closing costs tend to be between 5-10% of the purchase price and will need to be paid upfront. Of course, you'll also need excellent credit to qualify for those terms (think 720 credit score or higher). Most loans require 5-10% down.

There will definitely be PMI, which is private mortgage insurance. Unless it's VA, saying there isn't any doesn't sound right.

You may have low month payments. In all reality, the payment amount for a $275,000 loan is only about $1,000 per month. But then you add mortgage insurance, homeowners insurance, property taxes and possibly an annual HOA fee. My mortgage payment is only about 60% of what I pay for my home monthly to the mortgage company when you add all those other things in.

My guess would be out of pocket closing costs and all the extra costs of homeownership. That doesn't mean it isn't a good idea to buy a home.

what they offer is bovine manure.

sounds like u need some more learning

b4 signing up to get foreclosed on.

here to get a non rip off loan

u need an income at 1/4

of mortgage per year.

income 40K = mortgage 160K

u need a proven income last 2yrs

at that level.

u need a down payment minimum 5%

best 21%.

anything under 20% Requires PMI.

Privat Mortgage Insurance on some loans

stops after u have 20 -21% equity.

SOME do NOT stop and continue until

paid off - decades later.

here a 160K loan has closing costs from

5000 -10000$. often up front. worst case

rolled into loan where it become 3 times the cost.

u will need 3000 -6000 for start up costs in

new house. out of pocket, yours.

find a library to study these at least

house buying kit for dummies, e.tysen.

total money make over, dave ramsey.

both will save u from foreclosures.

good knowledge is good luck.

You will find many varied replies on this forum. You did not provide enough information as to the type first time buyers program you were offered to get into specifics about the mortgage loan program being offered.

Since this is the case, we are guessing based on our experiences and knowledge about the mortgage loan field

.

In order to find out the program being offered you would need to sit down eyeball to eyeball with a mortgage loan officer from the bank to get an understanding of the program they are offering.

It might be they have Real Estate on Hand (REO) previous foreclosures that they would like to move and would offer you one of these properties with this program.

The local city or county might be offering a first time home owners program that the local mortgage lenders have access to therefore are offering the mortgage loan program to potential first time home buyers.

The down payment offered, probably does not include closing cost that would be involved. You would be required to pay as a minimum your hazard (fire) insurance for a minimum of one year as well as the current county property taxes.

You might also be required to pay points and fees for the mortgage loan you would be approved for.

If this is a government mortgage loan being offered, normally you would be required to pay something akin to Private Mortgage Insurance (PMI) for the life of the mortgage loan and would be collected by your mortgage lender through your monthly mortgage payment. You have no option this is required.

Your interest rate would be determined based primarily on your credit score on you credit report. In obtaining this mortgage loan, this bank would normally be competitive with other mortgage lenders.

It might be that this bank has developed a hybrid mortgage loan program and would not be selling this mortgage loan on the secondary money market. This bank would maintain, keep and service this mortgage loan through their system.

I hope this has been of some benefit to you, good luck.

"FIGHT ON:

It's probably a hybrid fixed/adjustable loan or a mortgage and piggyback loan. With less than 20% down, you need PMI.

Read "Home Buying for Dummies" to learn all about the home buying and finance processes. There are lots of traps that can cost you thousands or tens of thousands of dollars.

Yes, it is too good to be true.

1. You would have to qualify for a VA or USDA loan for that little down.

2. PMI would be mandatory.

3. The monthly payments would not be low.

Guessing this is maybe an interest only loan.

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Sorry but I don't know about this

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