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What type of loan is right for me?
by Annie Christian - Special to the Sparks Tribune
Mar 24, 2011 | 940 views | 0 0 comments | 5 5 recommendations | email to a friend | print
Annie Christian
Annie Christian
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In last week’s column, I talked about how to qualify for a loan and what lenders are looking for, using anxious first-time homebuyer Jose as an example.

Sarah, another first time homebuyer was also ready to check out the reality of homeownership for herself and asked me for help. Here’s her story.

Sarah is a single woman who has worked for the same company for eight years. She has limited savings, however she does have some money put away in a company 401K. Between 2004-2007, Sarah watched home prices skyrocket, nudging her out of the buying market.

Currently, Sarah pays $1,200 per month for a lovely townhome in Sparks and her landlord is about to raise her rent — again. Will Sarah pay $1,400 per month on someone else’s mortgage for yet another year? Not if she can help it.

I introduced Sarah to a local loan officer to review her options. At the initial appointment, the loan officer input all the numbers from the paperwork Sarah brought with her. Sarah asked what she could afford for a $1,200 payment, down payment and what type of loan is right for her. She liked the answers and information the loan officer gave her and suddenly felt confident that throwing away her $1,200 monthly rent money was no longer smart and buying her first home was no longer scary.

Next, I answered more of Sarah’s questions about everything from total monthly house payments to her anxiety about losing a home like so many others have … an unfortunate sign of the times we’re all living in. Homeowners that bought in 2004-2007 committed themselves to a peak real estate price. Shortly after they bought their homes, property values dropped 25 to 50 percent or more in some areas.

Choosing the right loan might be a daunting prospect for the first-time homebuyer. Similar to buying a car, it’s essentially a matter of new versus pre-owned. You can choose to buy a brand new house custom built for you in about three to five months, like ordering a new car from the manufacturer with all the bells and whistles that your heart desires. Also like a brand new car, it comes with a brand new house smell but not much else, including upgrades. When you add up all the upgrades, the final purchase price can raise more than eyebrows. It can put the house out of your reach or your comfort zone.

The reality is a “pre-owned,” or resale, home is more affordable than a brand new one. Very often you get to enjoy some upgrades in a resale home such as granite countertops, upgraded kitchen cabinets, tile flooring, upgraded carpeting, central air conditioning, a high-efficiency gas furnace, fully landscaped backyards and more.

Here is a brief description of loans available to first time buyers:

Conventional loan: Typical down payment is 20 percent of the purchase price. Can be used by the consumer purchasing a primary residence, second home or investment properties.

Fannie Mae Home Path conventional loans: Available for Home Path Homes (see www.homepath.com). Three percent down for primary residence or 10 percent for a second home or investment property.

FHA loans: Down payment is 3.5 percent. This loan can be used for a first-time homebuyer. This loan must be for a primary residence. No maximum income restrictions on this program.

U.S. Department of Agriculture loans: 100 percent loan with no down payment required. Limited to outlying areas such as some parts of northern Spanish Springs, Cold Springs, Fernley, Fallon and Dayton. Primary residence only, income restrictions apply.

Veterans Administration Loan: This is a 100 percent financing loan available only to military veterans. Primary residence only. No down payment is required. Repeat use of VA is allowed.

On a Friday morning, Sarah was pre-approved for up to $200,000. Her loan officer gave Sarah a spreadsheet of sale prices and payments to provide a clear idea of what sale prices are in her comfort zone.

Sarah and I narrowed down the listings in her comfort zone, reviewed details about each home and she pointed out the three homes that she wanted to see. After the tours, Sarah chose a home that met her requirements: large yard, spacious floor plan and a garden tub in her master bathroom. Sarah made her first offer that day and it was accepted without any conditions. Her new monthly payment is lower than her current rent.

Annie Christian is owner of The Annie Christian Real Estate Group and is a real estate broker. She helps clients with everything from buying and selling to foreclosure and short sale. To submit a question to her, call 351-5117. Her website is www.anniechristian.com.
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What type of loan is right for me? by Annie Christian - Special to the Sparks Tribune


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