Part of the reason so many homeowners are in trouble is that many had no clue what they were doing or what type of loan they were receiving. As a result, more than 1 million homeowners are now in foreclosure.

Advise your clients to take advantage of free education and counseling and to make an effort to fully understand the responsibility that comes along with homeownership.

FHA loans

Through its loan programs, the FHA helps low- to moderate-income earners purchase or refinance with extremely favorable terms and no prepayment penalties. FHA loans only require a 3.5-percent downpayment and are not credit-driven.

In truth, FHA loans have no minimum credit requirement, but most lenders now require at least a 580 credit score.

The best aspect of FHA loans is the rates, which are as competitive as a standard conventional loan. This form of financing allows homebuyers to acquire a low interest rate without having perfect credit and without depleting their entire savings account for a hefty downpayment.

The FHA does require mortgage insurance because the loans are more than 80-percent loan to value.

Loans for veterans

Another government agency, the VA also offers good loan terms to U.S. service veterans. Under VA guidelines, a veteran can get 100-percent financing without mortgage insurance and with low rates.

Furthermore, with VA loans, sellers are allowed to cover all closing costs, as well as prepaid taxes and insurance.

The government guarantees as much as $104,250 of an owner-occupied purchase, which basically substitutes a downpayment. This greatly reduces lenders’ risk, which in turn lets them provide 100-percent financing.

Doing homework

There are many factors that first-time homebuyers should consider when preparing to purchase a home. As a broker, identifying their financial objectives and comfort levels is crucial. You can help your clients understand that most of the negativity surrounding the housing market pertains to struggling homeowners with bad loans.

There is a surplus of homes on the market without an equal amount of qualified buyers. This is extremely advantageous to those looking to purchase, thus creating a buyers’ market in many areas of the country. It is important for potential first-time homebuyers to understand that and to realize that they could be in the best-possible position.

Justin Lopatin is a mortgage planner with American Street Mortgage Co. and specializes in working with first-time homebuyers and Federal Housing Administration financing. He studied economics at the University of Iowa, and before a successful mortgage career, he worked for an options trading firm at the Chicago Board of Trade. Reach him at (312) 376-3760 or jlopatin@americanstreetmortgage.com.

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