Generous Assistance Available for First Time Home Buyers

Generous Assistance Available for First Time Home Buyers

Buying a new home is a major commitment and many first time buyers feel apprehensive and overwhelmed about all of the decisions they have to make.  There are decisions when they first meet with their lender and more when they begin looking for the perfect house.   Then there is the big one, choosing the right house and making an offer followed by negotiations with the seller over the inspection.  Decisions continue until the paperwork is signed at closing and the key to their new home is in hand.

Fortunately there are many resources to help, including agents and lenders and of course most first timers will start their education online making them much savvier buyers than their parents were when they bought their first home. However, while this is a good start, they need to be skeptical about the info they find online.  For example, many are frustrated when they read that they need 20 percent of the house price for a down payment, but this is far from the truth, so don’t give up until you talk to the experts, your hometown lender and your real estate agent.

Not only can these pros help you decide if you are ready to buy, but they will provide the education you need to make good decisions and help ease you through the process. And even if you are not quite ready to buy today, they can help you with a plan to get you there as soon as possible.

The First Steps
If you are a new buyer you may be looking forward to what may seem like the most exciting first step of the process— looking at homes. 

However, nobody wants to find the perfect house, fall in love with it and then find out it’s out of their price range, or that the monthly payments are way more than they are comfortable with even if they are qualified to buy. This is why the first step is always to talk to your lender who can tell you if you are financially ready to purchase, and, just as important, how much house you can afford. 

In this way, you avoid the heartbreak of finding the perfect house and later learning you can’t afford it, or worse yet, that you don’t qualify to buy at all. Your lender will also educate you about costs of home ownership you may not have considered such as taxes, insurance or homeowner association fees.

First time buyers are often “overwhelmed” with the process, said Marlo Allen with Mountain Area Realty in Nelson County.  A good lender can help them feel “comfortable with the process,” she said, adding that they may qualify for more, or less, than they realized.  If they qualify for more they may still not want the payments that come with it, she explained.  On the other hand,  if buyers understand their payments and are still comfortable with this level of obligation, they are ready to start looking at homes in that price range. 

The lender can help you “make a plan,” says Jay Domenic with Movement Mortgage. This  includes evaluating different loan programs that are available and looking at your credit and other qualifications. Part of what the lender looks for is if you have sufficient funds for your down payment and closing costs.  If the amount of cash required is a challenge, as it is for many first time buyers,  your lender can refer you to sources of down payment assistance available in our area.

While the internet can be a good source of preliminary information, it is important to visit reputable sites in order to get the most accurate information. For example, Julia Morris with Fulton Mortgage explained that first time buyers often  have the erroneous idea they need between 10 and 20 percent down in order to purchase a home.  She suggests you “just do a little homework” and visit a site such as that of the Piedmont Housing Alliance (PHA) to get familiar with the terminology, the process, and the requirements.

It is also critical to contact a local lender, someone who understands the resources unique to our marketplace and can answer your questions based on knowledge of your situation.  When you do so you can avoid a lot of potential problems and may discover that you do indeed qualify to purchase a house after all.  On the other hand, even if you find that buying a home is not an option today, many lenders will either help you develop a program to get you qualified in the future, or refer you to a housing counselor at PHA.

When your lender determines you are qualified to make a purchase they will write a pre-qualification or pre-approval letter.  The latter is stronger because it means the lender has reviewed your credit report.  With this letter in hand, you are ready to look at homes and when you find one that suits, your agent will use it to prove to the sellers and their agent that you are a serious buyer who is qualified to follow through on your offer.  This is especially critical in our current market where multiple offers on popular homes are not uncommon and you may be competing with several other buyers.

Down Payment Assistance and Homebuyer Counseling
A big advantage that first time buyers enjoy is access to programs to assist them with the funds they need to purchase a house.  Often this kind of assistance is the difference between the buyer moving into their own home or continuing to rent. Many of these sources require home buyer education and/or counseling, which can help smooth the experience of buying a first home. 

One example of a program for first time buyers is the USDA Rural Housing Services Loans, Domenic explained.  While the loan has geographic requirements, and city properties are not included, it can be a good choice for buyers who meet the household income limits. And while neighborhoods like Mill Creek that are south of Interstate 64 or others east of Pantops may not seem rural, they may, in fact, still qualify for one of these loans.  One of Domenic’s recent clients used this loan and had also negotiated a contract where the seller agreed to pay closing costs.  When he left the closing table he was able to actually put money back in his pocket.

The Homebuyer Advantage Plus Program from Fulton Mortgage is another option for qualifying first time buyers, Morris said.  This program offers 97 percent financing, but can be combined with down payment assistance plans as well as help from sellers up to a total of 105 percent of the home price.  Another huge benefit is that there is no mortgage insurance requirement, which means lower monthly payments and substantial savings over the life of the loan.  Home buyer education is required.

PHA is also an excellent source of information and programs for first time buyers.  Not only do they provide the buyer education programs required by many of the special funding programs, they also offer home buyer counseling and access to funds for down payment and closing cost assistance.  Over the years this organization has helped in excess of 830 families buy homes in Planning District 10 which includes the counties of Albemarle, Fluvanna, Greene, Louisa and Nelson and the City of Charlottesville. 

Buyers can start by visiting the PHA website and downloading and filling out the forms in the intake packet. They can then set an appointment to work with one of PHA’s housing counselors to determine the steps required for them to become a homeowner.

First time buyers can also contact PHA for help with saving their down payment using a matching program called VIDA.   With this unique program, qualifying participants can obtain funds they need for closing costs by first saving $500.  The state will then match these funds with an additional $4,000 and make the entire amount available for home purchase.

If credit issues stand in the way of obtaining a mortgage, PHA can help.  “We’ll coach them on how to rebuild their credit,” said Virginia Leary, one of PHA’s housing counselors.  “We’ve had several clients come to us with significant credit issues and after resolving and rebuilding they were then able to purchase a home.” 

First Time Buyer Market
Homes are available for first time buyers in our area, usually defined as those with prices less than $200,000.  For example, most recently, the majority of PHA’s homebuyers have received assistance with homes in Albemarle Leary said.

John Updike with Roy Wheeler Realty Co. described some of his recent transactions, one a brick rancher off of Rio Road that sold for $195,000, another a home in Azalea Gardens that went for $200,000. He also recently worked with a first time buyer couple that wanted acreage.  He found them a home on two acres in Scottsville,  just 20 minutes from their downtown jobs.

Allen advises that prices are still good in Nelson County and there are lots of options.  She cautions, however, that the condition of the home can be an issue especially for low down payment loans for which both the buyer and the house must qualify.  For example, the buyers could be well qualified to purchase, but the house could pose a problem if it lacks central heat or fails to meet some other standard.  Consult your lender for more details.

Your Agent is Key
First time buyers need more guidance than those who are more experienced, Allen explained. “They tend to be more timid, and the financing can be daunting for them,” she added.  She sees her role in part as someone who “takes the fear out of it,” so they can be more comfortable with the process.

In today’s market that means educating first timers on the possibility of having to compete with other buyers for the same home, Updike advises.  He tells them “if you lose out on the first offer, keep plugging away.”  It is important to “be proactive and stick to it.” 

A common misconception is that once a purchase contract is signed and sealed, the buyers and their agents have nothing to do but wait for closing.  In fact this is just the beginning and a crucial part of this process, the home inspection, awaits.  Updike counsels his buyers that the inspection is another negotiation, suggesting they go into it understanding they may not get all they ask for.  Instead he prepares them to ask for help with any bigger items such as problems with the roof or the heat pump.

A Great Time to be a First Time Buyer
If you are a first time buyer with good credit, it’s a great time to jump into the market.  There is still inventory available and interest rates are low, but homes are selling fast.  Contact your REALTOR® and talk to your lender, then work with them to assure a fun and smooth transition into home ownership.


 Celeste Smucker is a writer and blogger who lives near Charlottesville.