Specializing in Grosse Pointe, St. Clair Shores
Harrison and Chesterfield Twp, Harper Woods
In the past, to buy a home you needed to have at least a
20 percent down payment on a home. Today, lenders often
underwrite mortgages with 3 to 5 percent down. You might say
"But how do I come up with the 3 to 3 percent?" Here are just
a few ways:
Tap your retirement savings, either borrowing from a 401 (k) account or withdrawing money early from and Individual Retirement Account (IRA)
Borrowing money from an IRA can be a good strategy for first-time home buyers. You pay taxes on the disbursement, but a 10 percent early withdrawal penalty is waived if you use the money to buy your first home. When you borrow from your 401(k), you repay the loan over five or more years, with interest. Most 401 (k) plans will let you borrow up to $50,000. of your balance of 50 percent, whichever is less.
People with virtually no savings have options too. Some loan programs allow borrowers to use gift money to make down payments. Generally, the gifts have to come from family members, spouses or domestic partners of nonprofits.
Most states have housing finance agencies that offer special loan programs for low-to moderate-income buyers. Fannie Mae, the biggest buyer of mortgages offers loans through housing finance agencies that require down payments of as little as 1 percent of $500, whichever is less.
No and low down payment loans require mortgage insurance, PMI, which you can avoid by getting a "piggyback loan: A Piggyback loan is a home equity loan that piggybacks on top of a primary mortgage. You could put 5 percent down, get a primary mortgage for 80 percent o the home's price, and a higher interest home equity loan for 15 percent of the price.
MISDA loans require moderately good credit. The advantage is that your up-front money is a free loan for as long as you own the home. The disadvantage is that you can not earn more than 80 percent of the local median income, which means $39,100. per year for a single person and $55,000. for a family of four. The home cannot cost more than $105,000. or $128,000. if it is new.