Raising the Roof, Raising the Down Payment

With the lowest home prices in a decade and record-low mortgage rates, 2011 could be your year to purchase your first home or upgrade to your dream home. Wait, not so fast. Although the above premises are true, what is also true is that tight lending standards are keeping many potential home buyers from realizing that potential. Even with good FICO scores, virgin homebuyers can need lots of cash to secure financing.In an article in the Chicago Tribune’s special section, Chicago Homes, Susan Dewey, executive director of the Virginia Housing Development Authority states, “For first-time homebuyers, generally the biggest obstacle to buying a home is the ability to have a down payment.”Luke Mullins of U.S. News & World Report, in the Tribune, lists nine ways to attain the funds needed to buy your bungalow:•    If you are a U.S. veteran or active duty personnel, you may qualify for zero-down-payment mortgages through the U.S. Department of Veterans Affairs. These loans are made by private lenders but backed by the agency. Similar loans are available through the U.S. Department of Agriculture Rural Development program.•    Depending upon the state in which you reside, first-time home buyers may qualify for down payment assistance via grants, subsidized home loans and other programs through their state housing finance agency.•    You may qualify for a low-down-payment mortgage through the Federal Housing Administration . The FHA is a federal agency that insures private lenders against default by the mortgagee. Qualified borrowers can get a FHA-backed loan for as little as 3.5% down; the FHA backs about 30% of current mortgages.•    If you are under 59 ½ years of age and have not owned a home for the last two years, you can withdraw up to $10,000 – penalty-free – from your IRA to put toward a real estate purchase. This plan should be used only after exploring your other options.•    If you absolutely must, you may be able to tap your 401 for a down payment on a principal residence, although many financial advisors against depleting a major retirement resource.•    See if your parents, grandparents or other friend/relative can give you the funds for a down payment. However, be aware that these loans must be documented in writing as gifts, with no obligation on your part to repay the money. Cash gifts from a single source that exceed $13,000/individual or $26,000/couple are subject to federal income taxes. Alternatively, perhaps they can lend you the needed cash.•    Although these may take some time, explore setting up a savings account, selling assets or getting a second job to raise the funds needed to procure your mortgage. Remember the adage, “All good things come to those that wait”.Homeowners who are having difficulty making their mortgage payments or rent may be considering filing for Chapter 7 or Chapter 13 bankruptcy protection. This is a very complicated process that requires the guidance of an experienced bankruptcy attorney and a reputable bankruptcy law firm. Please visit Legal Helpers at www.legalhelpers.com for legal advice that you can trust.

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May 28, 2011 • Posted in: Bankruptcy News

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