Last week we provided some great tips to help prepare buyers for their house hunt and now we’re following up with some more detailed information on lending and obtaining a mortgage loan. A big question everyone has when purchasing his or her first home is “how much of a down payment do I need?” I have some good news…if you don’t have 20% to put down on a home purchase you can still get a loan! Maybe you have about 10% to put down on a house you could get a loan without the required mortgage insurance. Even if you have only 3 or 5% you could still get a loan, although private mortgage insurance is required for these types of loans its nice to have the option of purchasing with less then 20% down. What is private mortgage insurance? PMI or private mortgage insurance is an additional monthly cost that is added to the loan payment if you were to put less then 20% down and it is provided for the lender’s security in case you default on your loan. Being able to put less then 20% down is exciting news, but don’t forget those closing costs! You must have some money for those fees as well. As mentioned in the previous blog a lender will be able to provide you with an estimate of closing costs so that you can prepare.
It’s encouraging for those looking to purchase homes in today’s economy that you can still do so with less then 20% down.
Below is a general overview of programs available at our local banks. Please contact the lending institution for specific details on qualifying and rates.
Martha’s Vineyard Savings Bank does not offer programs with Private Mortgage Insurance so they cannot go above 89.9% LTV**. They do however, offer a first time home -buyer program where you can put 10.1% down and not have any Mortgage Insurance.
Santander offers FHA loans, which have the lowest down payment requirements at 3.5% down and this loan would require mortgage insurance. They have conventional loans with 95% LTV also requiring mortgage insurance and they are a Mass Housing Approved Lender which has some strict income guidelines and from what I understand it does not offer a very high LTV so it could be challenging to find something on the Vineyard that would qualify for Mass Housing, however it is a down payment assistance program and may be worth looking into.
Edgartown National Bank offers programs with Mortgage Insurance so they can offer loans with as little as 5% down.
Cape Cod Cooperative offers a first-time-home-buyer program with 10% down and no Mortgage Insurance on up to a $500,000 loan amount. This bank also has loan programs requiring as little as 5% down, which would require Mortgage Insurance. The do have minimum credit score requirements for these programs. They also have the ability to go to a 40 -year amortization schedule. They do offer a competitive program for second home purchases as well. They do not offer VA or FHA loans.
Cape Cod 5 located on the Cape also has a lending branch here on island and they have some great first-time-homebuyer programs too. They offer Mass Housing programs, and can offer loans with LTV up to 97% with Mortgage Insurance. They have great construction loans as well so if you find land or a home that needs a rehab you may want to give Cape Cod 5 a call.
We are just touching on programs that would interest first time home-buyers here, however all of these banks also offer mortgages for refinances, construction loans, jumbo loans and straight purchase mortgages for those not considered first time home-buyers.
** LTV stands for Loan to Value and it’s the amount of money a lender will loan you based on the value of the home you are purchasing.
Look for next week’s wrap up to this blog series with some final tips and putting it all together.