First-time Home buyers, Look into a 3% Down Conventional Loan

First-time home buying* just got easier and more affordable. There is a new type of loan out there that may be of interest. It’s the 3% down conventional loan, and it’s doing wonders for first-time home buyers like you.

*I have to preface this blog post with a strict definition of what a “first-time home buyer” is. Only those who have not owned any property in the past 3 years are considered a “first-time home buyer” and qualify for this type of loan. If two people are buying the home, only one needs to be a first-time home buyer.

Most recently, the loans most first-time home buyers have been selecting was either a 5% down conventional loan or an FHA loan requiring a 3.5% down payment. Now that the 3% down conventional loan is available buying a home has become a little easier and more affordable for first time buyers.  So, if you’d like to own a home, you owe it to yourself to see if you qualify.

First of all, what is the 3% down conventional loan? This loan is a better alternative to both an FHA loan (where you put 3.5% down) and a standard 5% conventional loan because it allows you to qualify with a lower down payment and it makes your mortgage insurance (aka MIP or PMI) much cheaper. Plus, once you reach 20% ownership of the property, it drops off without being forced to refinance.

I consulted with Chad Trease, Senior Loan Officer at Prime Lending for more information.

“This is a great alternative loan through the Fannie and Freddie guidelines,” he explains. “This loan may open the gates for more homeowners.”  Plus, according to Forbes, the 3% down payment conventional mortgage financing “does not handcuff borrowers to mortgage insurance forever like FHA MIP does.”

First-time homeowners still have the ability to utilize a 5% down conventional loan or an FHA loan to purchase their home but the 3% down loan maybe a better option. In addition, both the 5% and 3% down payments can be gifted if need be, allowing for even more flexibility. 

First-time home buyers, now that buying a home is more possible than ever before, it’s time to contact me to schedule a consultation and learn more. Join me and Chad at our first-time homebuyers seminar on February 26 at 6:30pm at 11005 Metcalf Ave. in Overland Park to get even more helpful information about buying a home.

FHA Property Flipping Waiver Expires—What Does This Mean For First-time Homebuyers?

On December 31, the FHA announced that the property flipping waiver had expired. The waiver prohibited the use of FHA financing on the purchase of a single-family property that was resold within 90 days of the previous acquisition. So now that the waiver has been expired, what does this mean for first-time homebuyers?

I sought out the professional opinion of Chad Trease, Senior Loan Officer at Prime Lending. “Now that the 90 day waiver has gone away,” explains Chad, “it is going to be hard to buy a house that was recently flipped.” He explained that any home that has been flipped will not be eligible for FHA financing until its 91^st day.

Is this a problem? According to Chad, probably not. “Most flips take longer than 90 days,” he explains. The reason for this action from the FHA is to do away with people who purchase a home, do little to no work on it, and try to sell the property for even more money right away.

First-time homebuyers need to be aware of this change, especially when out in the market looking to purchase a home. First-time homebuyers should also be aware that although you cannot use an FHA loan until after 90 days, you can use a conventional loan.

Almost anyone qualifies for an FHA loan, however, you are only allowed to have one at a time. FHA loans typically have very expensive mortgage insurance that never drops off the loan. According to Chad, an FHA loan is ideal for homebuyers who are credit challenged. In other words, it’s somewhat of a last resort. Conventional loans, on the other hand, are for first-time homebuyers who have not owned property in the prior 3 years. Conventional loans have a lesser down payment and have a cheaper mortgage insurance that drops off once you reach 20% of the property.

First-time homebuyers, keep in mind that it is not common for a homebuyer to purchase a flipped home before the 90-day timeline. As mentioned before, most flipped houses take longer than 90 days to complete. However, if you have further questions or concerns, contact me and we can talk through the details.