Everyone wants to have a dream home, but not everyone can afford to buy his or her first house. In order to remedy this, lending institutions offer a very special product called the first-time home buyers loan. To know more about this product, here are the frequently-asked questions as well as their respective answers:
What is a first-time home-buyers loan?
A first-time home-buyers loan is a special lending program offered by some banks and lending companies that grant loans with low closing costs and down payment (brought by the fact that the government insures the loan) to first time home-buyers.
Who can qualify for the loan?
Anyone can qualify for this home-buyers’ loan, although lending companies give first priority to low-income and moderate-income earning individuals. As the loan mainly targets people who never had a home, it is a perfect opportunity for formerly-homeless people who want to get a permanent place of their own.
What are the features of this special loan?
The first-time home-buyers loan has its set of features that appeal to certain individuals:
- Extremely low monthly payments
- Subsidized interest expense on borrowed loans
- Loan forgiveness for up to a certain amount of the purchase price in case of default
- Assistance in settling the down payment, closing fees and other expenses on the part of the buyer-borrower
- Limited amount in processing fees and other charges charged by lenders against borrowers
What are the conditions attached when getting this loan?
The most common condition in getting a first-time loan is that a buyer can only borrow up to a maximum amount. This means that individuals cannot loan for purchasing an expensive home, so applicants will have to settle for less-expensive houses in a neighborhood. Another condition is that the individual must use his or her purchased house as primary residence, in order to dissuade shrewd applicants from taking advantage of the housing loan.
Lastly, the house intended for purchase has to meet standard safety requirements and health codes. The housing collateral has to be in good condition or else the home buyer has to look for a more suitable property. It is also important for the home buyer to educate himself on how to buy a house.
- What are the pitfalls in getting this home-buyers loan?
To begin with, a borrower loses some of the benefits upon selling the residential property too early. This is because lending companies discourage borrowers from taking advantage of the lending program. Besides losing benefits, the borrower has to share market gains with the lending company when the home property increases in market value. Also, the borrower has to pay for recapture tax in exchange for the benefits received from the program.