It’s hard today to buy a home – especially in an area as hard hit as the Arizona real estate market. The financing market has tightened up considerably since the housing crash in 2008, and it hasn’t loosened the purse strings much over the last four years.
Right now to arrange a mortgage on a new home, you almost always have to have a good credit score and 20 percent of your home’s value as a down payment in addition to closing costs. Those who would normally have home equity to use as a downpayment on their next home have lost that in the housing crash that hit Arizona so hard, and coming up with that much cash in the current economy is a big obstacle to buying a home – even if it ensures the same sort of housing crash doesn’t happen again.
Fortunately, however, there are still ways to buy a new home if you’re not able to round up the 20 percent down payment in cash. You just need to understand the programs and be willing to do what it takes to make things work out for you – it requires research and flexibility, but that’s still better than tens of thousands of dollars you may not have in the bank just yet.
1. Home Buyer Assistance Programs
Many cities offer programs to certain types of buyers or those looking in certain parts of town. As Arizona was hit hard by the housing crash in 2008, in subsequent years many additional and new programs have been developed to aid those looking to become homeowners. Among the programs available in Arizona you’ll find:
USDA Rural Development Programs – Arizona is part of the United States Department of Agriculture’s Rural development program. This program is designed to help buy up and stabilize the rural towns and communities throughout the state. Within these programs, those considering a new home can use a rural housing guaranteed loan to borrow up to 115% of the median income of the state or use a section 502 loan to buy and improve homes in a rural area. You can get more information about this program on the USDA website.
NSP: Arizona – The Neighborhood Stabilization Program (NSP) is also working within Arizona and can strongly benefit potential homeowners. The federal government has awarded close to $40 million to community programs throughout Arizona for the express purpose of providing loans for the purchase and rehabilitation of homes that have been abandoned or foreclosed on. Communities and cities like Phoenix, Glendale, Tucson and Mesa are among those associated with this program.
The program benefits low and moderate income individuals whose income doesn’t exceed 120 percent of the area’s median income. So a household with an income of $60,000 annually would qualify for the program if the average income in the area was $50,000 per year. For additional details on this program, visit the NSP page on the U.S. Department of Housing and Urban Development’s website.
2. Veterans Assistance (VA) Loans
If you served in the military or your spouse or partner did, you may be eligible for a VA loan. These loans are designed for those who served in the military for a minimum amount of time and who have earned an honorable discharge or retirement.
With a VA loan, you don’t have to pay the down payment on your home, but there are additional costs associated with the VA loan that are normally passed on to the sellers. Be sure to discuss these costs with your real estate agent to determine how they affect your bidding on homes and the closing procedure as well.
3. Owner Financing
Finally, if you don’t have a down payment for a home, be upfront with your real estate agent. The agent may be able to help steer you toward homes that are fully or partially owner financed. These homes are being sold by the owner, but rather than getting a loan through the bank, the owner of the home is arranging financing for you, the buyer.
Instead of paying the bank for the next thirty years, you’ll be paying the original owner of the home. It’s not a hugely common situation, but it is becoming more commonplace in the current lending environment. If you’re going to use owner financing, be sure to have the necessary legal and real estate advice to protect yourself and your interests.
Photo credit: Ken Teegardin Blue Piggy Bank
About the author: Rebecca Garland is working hard to populate the internet with relevant, engaging materials. She writes for many clients including MilitaryVALoan.com and enjoys a wide range of topics including home improvement and real estate finance . You can learn more about Rebecca on her professional site www.internetauthor.net.