I read an interesting article this morning about first time home buyers and financing. The article highlighted some of the friendlier low down payment loan products offered by many large consumer banks. There is a stark difference in lending practices today than what existed at the height of the housing bubble ten years ago. Incomes are verified. Credit scores are verified. Credit worthiness is established. So the fear of junk loans is alleviated to a larger degree. Also, the loan products being pitched now are fixed rates and for a normal term of 30 years. Borrowers can feel more confident that there will be no surprises.
However, some finance experts warn of the perils of accepting an attractive loan that would constrict your cash flow. In other words, be careful how much you bite off. They make the argument that one should run their finances as if they were a business. One must account for unexpected expenses and other debt obligations. Being qualified for a low down payment loan does not guarantee that you will still have money left over to buy food. So when you get starry eyed about your loan qualification, keep in mind that you still have to account for all your other expenses, such as student loans, credit card debt, and car payment. And that’s just the expenses you already being too the table. Tack on home insurance, taxes, maybe a little life insurance policy for your loved ones, and how about keeping a little on the side for a rainy day. The issues of cash flow are real but are not always apparent at first and often a problem when is too late to address. I encourage you to read the article linked here and see if the analysis of lending with little money down makes sense to you.
If you need help finding the right home and appropriate loan product, you can contact me and I can help you get started on the right path by providing you the information you need.
All the best,
REALTOR® Erick