Do you fall into the category of the working family that works to pay the bills but also finds it hard to save up the $10,000 to $13,000 to use as a down payment on a home. Your not alone, but there is a way to buy that home!
After rates sat at record lows for the last half of last year and the start of this year it looked like the times of low rates were behind us. Up until March of 2010 you could get a discounted 5 year rate at 3.69%. Since then the rates went up a full percent only to come back down to the 3.79% rate they are at today.
When rates started to increase, it looked like the use of the 0 down mortgage was going to fade away. With no money down, the banks will give you the 5% down needed to buy a home. In doing this they sign you up for a 5 year mortgage at posted interest rates. When the rates went up the posted interest rate increased from 5.25% to 6.25%. On a $250,000 home that is $166.70 per month extra. Now the rates have fallen back to 5.49% for the 0 down mortgage.
Looking on MLS.ca, I entered the purchase range of $200,000 to $250,000 in Houses, not Condo’s in Red Deer, and it gave me 38 Results in that price range. If you were to purchase a home at $250,000 on the 0 down product that would make your mortgage payment $1314 per month. Pretty close to where the rents are for a home.Knock that purchase price down to $225,000 and the monthly payment drops to $1173.
To qualify for the 0 down mortgage you must have great credit. The banks and mortgage insurance companies are going to look for your credit score to be over the score of 680. Also you must show that you have the money to cover the closing costs of the mortgage (see my blog about closing costs for explanation of closing costs). This is generally between 1% and 1.5% of the purchase price.
Obviously the other big thing is the income. You must show steady income coming in to cover the mortgage payments. To qualify for the $250,000 purchase price you must have at least a combined household income of $60,000 per year. This is also equivalent to a combined full-time hourly income of $29 per hour or two people at $14.50. Put that on the $225,000 purchase price and we are at $55,000 annually or $26.50 per hour.
So if you are thinking about buying your own home, but you are having a tough time-saving up for the down payment there still is a way. If you would like to find out more, please email me anytime email@example.com .
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Thanks for reading
Scott Bourke, AMP
Regional Mortgage Red Deer, Ab