The actual title for this article was “Let Tax Payers Cover Your Mortgage” which makes this one deserving of a coveted FacePalm.

Unemployed? Owe more on your mortgage than your home is worth? Your state might one day pay your mortgage.

Giving people free money to cover their home loans is just one of the radical ways that four states — Florida, Michigan, California and Arizona — plan to use $1.4 billion the Obama administration is sending their way to help the unemployed and underwater avoid foreclosure.

Many consumer advocates have said the government should help cover the payments of these troubled homeowners, lest the mortgage crisis continue spinning out of control and dragging down everyone’s property values. But other housing experts warn that paying off loans creates a moral hazard and could actually dissuade people from looking for work.

Innovative programs, however, are exactly what the administration was hoping for when it unveiled the Hardest Hit Fund initiative in February. Officials are looking to help the unemployed and underwater, who are now at the heart of the crisis. Despite the administration’s best efforts to stabilize the market, home prices are still sliding and foreclosure filings are at record highs.

States have radical ideas to stop foreclosures
The federal government is doling out a total of $2.1 billion to 10 states, which also include Nevada, North Carolina, South Carolina, Rhode Island, Ohio and Oregon. The others have not yet submitted their plans to Treasury for approval or have not made them public.

To be sure, the proposals will only a touch a small percentage of the unemployed and underwater homeowners who need help. But it will provide assistance to some of those who presently don’t qualify traditional loan modifications.

Administration officials will spend the next few weeks reviewing the proposals, but Assistant Treasury Secretary Michael Barr told CNNMoney.com that they contained some good ideas.

Subsidizing troubled homeowners
The recently unveiled initiatives are not identical, but they have two common themes: Helping the unemployed by subsidizing part or all of their monthly mortgage payments for up to two years and paying down underwater homeowners’ loan balances.

The states want the loan servicers and investors to match their largess, hoping to woo them by paying down as much as $50,000 of underwater homeowners’ loan balances.

But until now, financial institutions have been reluctant to reduce principal.

These proposals may irk Americans who are keeping up with their mortgage payments or don’t want tax dollars used to help their neighbors. But Alan White, a law professor at Valparaiso University, said all homeowners will suffer if neighboring properties fall into foreclosure.

“There are benefits for all of us for stopping foreclosures any way we can,” White said.

Plus, he added, many of the people who would be helped are those capable of paying their mortgages again once they find work. By example, he pointed to a longstanding Pennsylvania program that provides loans to the unemployed, which gives them assistance while they look for new jobs.

Also, covering homeowners’ mortgages is a better use of government funds than giving incentives to the servicers and relying on them to assist borrowers, said Paul Willen, senior economist at the Federal Reserve Bank of Boston. This way, he said, states have more control over who benefits from the initiatives.

“Every dollar spent will go to families who need it,” he said.

But delinquent homeowners aren’t the only ones who would benefit from these subsidies. In fact, the banks would come away with a huge win, said Mark Calabria, director of financial regulation studies at The Cato Institute. Not only would they have government money securely in hand, but they’d avoid the time and expense of the foreclosure process.

“This is a lot more than they would have collected otherwise,” Calabria said. “The lenders should bear the losses for this. They are the one who made the loans.”

Another concern is that these proposals will dissuade the unemployed from finding work or from relocating to an area with better job prospects, said Casey Mulligan, an economics professor at the University of Chicago. Such programs incent people to maintain their financial hardships.

“Why should anybody work if you are going to be in your house either way?” he said.

Posted in: Housing Market
Tags: Foreclosure, foreclosures, free money, home loans, innovative programs, obama, property values, traditional loan

What could go wrong?

Mortgage giant Fannie Mae bled another $13.1 billion during the first quarter, prompting the U.S.-owned company to request another $8.4 billion cash infusion from the Treasury Department.

Fannie Mae, which was placed into conservatorship in 2008 amid enormous mortgage losses, said it lost $13.1 billion, or $2.29 a share, last quarter, compared with a loss of $16.3 billion, or $2.87 a share, during the fourth quarter of 2009.

The company blamed the heavy losses on credit-related expenses that remain “at elevated levels” due to weakness in the U.S. economy and the housing market.

“In the first quarter we continued to serve as a leading source of liquidity to the mortgage market, and we made solid progress in our ongoing efforts to keep people in their homes,” CEO Mike Williams said in a statement.

Fannie said it purchased or guaranteed about $191.4 billion in loans during the first quarter and completed 94,000 loan modifications. The company said its purchases and guarantees financed about 516,000 conventional single-family loans and about 61,000 multifamily units.

Due to the heavy losses, Fannie said the Federal Housing Finance Agency has asked the Treasury Department for $8.4 billion on or before June 30. Fannie already received $15.3 billion at the end of 2009. Last week sister company Freddie Mac said it would need another $10.6 billion from the government.

Fannie didn’t shy away from saying it will continue to need cash, saying, “Due to current trends in the housing and financial markets, we continue to expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury.”

Shares of Fannie soared 6.8% to $1.10 in Monday’s premarkets, almost doubling the gains in the futures markets amid enthusiasm for Europe’s $955 billion rescue. Fannie’s stock was down almost 13% year-to-date as of Friday’s close.

Fannie said credit-related expenses rose sequentially to $11.9 billion last quarter due to loan modifications. Due to rising defaults, credit losses rose to $5.1 billion in the first quarter from the prior quarter. Fannie’s single-family serious delinquency rate increased to 5.47% at the end of the first quarter, up from 5.38% at the end of 2009.

“Promoting sustainable homeownership and maintaining ready access to liquidity are our guiding principles in serving the residential markets,” said Williams. “The strong credit characteristics of our acquisitions during the quarter are evidence that we continue to strike an appropriate balance in providing liquidity while also applying the lessons of the recent credit cycle.”

The future of Fannie and Freddie remain in doubt. Neither company has been included in the Obama administration’s financial regulatory overhaul.

Posted in: Housing Market
Tags: cash infusion, fannie mae, financial markets, fnm, freddie mac, futures markets, housing finance agency, Housing Market, mortgage market, treasury department

After a home inspection turned up everything from leaky toilets to termites, Cincinnati couple Hannah Powers and Ben Clinkinbeard thought about rescinding the $305,000 offer they’d made on a four-bedroom home. Instead, they got an estimate for the cost of repairs, and worked it out that the seller would pick up the $10,000 tab. “You can’t wash dishes and flush the toilet at the same time,” Powers, 28, says. “That’s a problem you’d think someone would mention.”

Though you may think you’ve found your dream house, no property is perfect. For buyers who signed contracts before May 1 to meet the deadline for the home-buyer tax credit, now is the time to make sure your new home isn’t hiding any defects or problems you weren’t aware of.

Some home buyers — in the rush to meet the deadline to get the tax credit — may have overlooked a few of “these issues related to home inspection,” says Robert Lattas, a real estate attorney in Chicago.

Here’s what you should know.

Inspection contingency
Like Powers and her husband, buyers should be sure to make the purchase contingent on a home inspection. The contingency period typically lasts a week or two. This is when the buyer should get an inspector to check the house for potential problems that need fixing — and to look for other obviously important information that could kill the deal. This could include things like water damage, a furnace that’s too old, or flaws in the foundation.

And with the hurry to get contracts done by April 30, “I’m sure there were many contracts that did contain a post-contract inspection period,” says Alan E. Katz, a real estate attorney with Greenfield Stein & Senior in New York.

Keep in mind, however, that, while a standard home inspection can be very revealing, inspectors technically don’t have to check for problems with appliances, sprinkler systems, septic systems, smoke detectors, lead paint, radon, asbestos or pests. Some inspectors — who may also be engineers — can check on these details, but often they’d be considered extras. (Read our story on home inspectors for more.)

Negotiating the repair
Many states, including Illinois and New York, require home sellers to fill out a property disclosure statement, which is supposed to note any “material defects” with the house that are known to the seller.

If the inspection uncovers a problem that wasn’t noted in the disclosure form, the buyer might — depending on how the contract clause was drafted — have the right to terminate the contract, have the problem fixed by the seller before closing, or get a credit for the cost of the repair at closing, says Katz.

If the seller lied on his report — for example, he knew there were flooding issues but didn’t disclose the information — the buyer could sue. But the buyer would need to be able to convince a judge or jury that the seller knew of the material defect and did not disclose it to the buyer, says Lattas.

Most real estate agents and attorneys representing home buyers would recommend against letting the seller handle the repair. The risk here is that the sellers will do a shoddy fix-up job. As a buyer, “I don’t want the seller to fix these issues, because I’m not aware of their quality,” Lattas says. A better alternative is to try to negotiate a repair credit as Powers and her husband did. But be aware that the contract might cap the credit amount.

Final walk-through
A standard contract typically includes a provision requiring the seller to “maintain” the property between the contract date and closing date. That means if the buyer sees a gash on the hardwood floor during the final walk-through that wasn’t there at the time of inspection, that’s considered a changed condition. “You might be able to bring this up and ask for a price abatement,” Lattas says. At that point, the seller will likely concede — they’re out of the property and presumably buying another home.”

Also note that every contract indicates what in the house is included in the purchase price and what’s not. Ellen Assael, a real estate agent with ZipRealty in Westchester, N.Y., had a client who, during the final walk-through, discovered that all the air-conditioning units had been removed. Under the contract, the units were supposed to be left in the house. “There was big trouble at the closing table,” Assael says. Ultimately, the seller gave the buyers a credit.

Property permits
Did the seller add a porch to the house or renovate the kitchen? If they did, make sure you’ve got an amended certificate of occupancy or building permit that verifies the improvements were reviewed by the municipality and done according to code.

“Sometimes owners don’t even know they need to get a permit to reflect the addition,” Katz says. Either way, buyers should have a provision in the contract which has the seller saying that the structure doesn’t violate any code. This could also affect the buyer’s ability to get bank financing. “If you don’t have a valid certificate of occupancy, the bank won’t go through with the mortgage commitment,” says Katz.

Posted in: Home Buying
Tags: contingency period, home buyer, home buyers, home inspection, inspection period, water damage

You probably know that boosting your home’s curb appeal is one of the most important ways to maximize its value. But that doesn’t mean you need to take on a pricey job like replacing the windows or installing a blue-stone walk. In fact, you’ll probably get a bigger bang for your buck with upkeep that costs a few hundred dollars at most — like touching up the paint, mulching planting beds, and staining fences and decks. “A lot of buyers expect to invest in big projects to customize the house, but no one wants to deal with deferred maintenance,” says Rick Wohlfarth, a realtor in Cundy’s Harbor, Maine.

Another advantage of these maintenance projects: Since they generally involve grunt work rather than serious expertise, you can save some cash by doing them on your own. Or if sweat equity isn’t your thing, it’s easy to find someone to handle the project at a very reasonable cost. The key is knowing what supplies to use and how to get the work done right, whether you’re doing it yourself or farming it out.

Touch up the paint outside

Why now: Aside from making a home look a tad, well, neglected, peeling paint lets moisture and ultra-violet light get at the wood siding. That means more paint is going to come off and, after a couple of seasons of exposure, your house won’t hold new paint well either, making a full paint job a pricier proposition.

What do buy: Go for the most expensive paint in the store ($30 to $45 a gallon). While it may be tempting to buy the cheap stuff instead ($15 to $20 a gallon), the high-quality pigments and binders in top-drawer paint make it last five or more years longer than economy products, according to Bud Jenkins, professor of paint chemistry at California State Polytechnic University at Pomona. Take a chip of existing paint to the store, and an optical computer will match the color. Ask for water-based paint, which is easier to use and more environmentally friendly than oil-based products. One gallon will be plenty. You’ll also need to spend another $40 for a gallon of premium oil-based primer, which will make the paint stick better.

Get it right: Don’t try to touch up more than a few isolated spots that are peeling — if your exterior has more than that, you’ll need a full-blown paint job, which should be done by a professional and typically runs $3,000 to $6,000 and up. Otherwise, simply remove any loose paint in the troubled areas with a scraper, and then use a polyester brush to apply one coat of primer to any raw wood followed by two coats of paint.

If you want to hire: House-painters generally won’t do touchups unless they’re fixing a previous paint job of their own — in which case, they may not charge you at all if the job was under warranty and it’s been only a couple of years since it was done. Failing that, your best bet is to hire an experienced handyman, who will cost you about $100 to $400.

Mulch the yard

Why now: A fresh layer of mulch provides visual contrast to the plants in your landscape, giving foliage and flowers eye-catching pop. Mulch also promotes healthier plants all year round because it keeps water in the soil and provides nutrients as it breaks down.

What to buy: Skip the bags of mulch at the home center ($3 to $4 each) because you need more than can fit in even the biggest SUV. Instead, spend $35 to $60 per “yard” (including delivery) for mulch at a landscape supply yard; it will be a local product, which is less likely to introduce invasive diseases or insects into your garden (a risk with bagged mulch that has been trucked hundreds of miles from its source). Cedar, pine, cypress, and hardwood are all equally good, so pick the look you like. But make sure to get 100% bark, since whole-log mulch can release plant-damaging compounds into the soil. Expect to use five to 10 yards of mulch for the typical lot, says landscape contractor Joseph Hillenmeyer of Lexington, Ky.

Get it right: Use a garden spade to cut a nice clean edge in the lawn around the beds. Then use a pitchfork, wheelbarrow, and rake to lay a two-inch thick mulch bed. It’ll take a weekend of hard labor to complete the job in an average half-acre yard.

If you want to hire: Since there’s little skill involved, a handy-man or even a laborer can handle this job. You’ll pay around $500 to $1,500 for mulch and labor on a half-acre lot — or up to twice as much if your yard is heavily planted.

Seal the decks and fences

Why now: Unless it’s a tropical hardwood like teak, all outdoor woodwork needs protection from the elements. Otherwise you’ll be shelling out $1,000 to $2,000 for new decking in a few years.

What to buy: Seal with stain, not paint, which would require you to scrape and sand every time you need to refresh the job. Use oil-based stain, which will soak into the wood and minimize the prep work for the next coat, says Ernie Sears, a Manassas, Va., deck and outdoor product manufacturer. Expect to spend $20 to $35 for a gallon of premium oil-based stain; choose a solid stain for a painted look or a clear stain for a natural look. Make sure the clear stain contains chemical UV-blockers to prevent wood degradation from the sun. You’ll also need wood cleaner ($25 a gallon) and a soft-bristled scrub brush or a power washer ($50 to $100 for a one-day rental) to remove dirt, mildew, and any remaining finish before staining.

Get it right: Good news for the home-improvement-challenged: Staining a fence is one of the most DIY-friendly jobs out there. Drips or spills land on the ground, where you can just scoop some soil over them.

If you want to hire: Some painters specialize in this job — and just about any handyman will tackle it. Either way, you’ll pay $500 to $1,000 for a typical deck or fence — unless you can use Tom Sawyer’s trick to get the kids to do it for free.

Posted in: Home Improvement
Tags: curb appeal, maintenance projects, new paint, paint job, peeling paint

You want to buy a foreclosure? Remember, there are both great opportunities and great pressures and pitfalls in this market.

First, you have to decide at what stage of foreclosure you want to buy. There are three options: 1. pre-foreclosure; 2. sheriff’s auction; 3. repossession, called REO (for real estate owned by the bank).

“The safest and best way to buy is when it’s a bank-owned property,” said Rick Sharga, a spokesman for RealtyTrac, the online marketer of foreclosure properties.

Pre-foreclosure: These homes are in the foreclosure process, but they have yet to be sent to auction. Owners are typically trying to unload them because they are “underwater,” owing more on the homes than they are worth.

As a result, potential buyers must negotiate a deal with the lender as well as the owner. That makes buying at this stage of foreclosure complicated and slow. But, you have the advantage of being able to inspect the home before purchase — which isn’t the case in other types of foreclosure sales. Sharga warned, however, that prices are usually higher than at other stages of foreclosure.

Sheriff’s auction: These sales yield the lowest prices, but they are fraught with difficulties. Often the house is unavailable for inspection, leaving buyers with a long list of expensive repairs — and much larger bill than they intended. This stage is usually best left to the professionals, the contractors and investors who regularly bid on these places and know what they’re doing.

Repossession: This occurs after the home has gone through a sheriff’s auction but does not sell and the bank gains possession of the property. Homebuyers may not get the best bargains during this stage, but they can nearly always perform a thorough inspection before closing, minimizing costly surprises. Plus, the property comes with a clear title.

In addition, the banks selling these places may extend preferential financing terms to the buyers and may have made some repairs before putting the property on the market.

Even in this safer stage, though, homes are still usually sold in “as is” condition. “That means the bank won’t pay for cosmetic issues,” said Adam Wiener, a spokesman for the Redfin, the online real estate marketer. “Although, they will often pay for some or all of repairs that are health and safety issues. That makes the home inspection even more critical.”

He also pointed out that, since you’re buying from a corporation, not an individual, the buying process can be faster, so be prepared to move quickly. Many times a listing goes on sale on a Friday and is sold over the weekend.

“The buyers and their agents need to be on top of everything from the inspection to the financing,” said Wiener. “Some banks will even charge a per diem fee for late closings.”

Once you’ve decided which type of home to buy, there are several common mistakes foreclosure buyers should take care to avoid. These include:

Getting caught up in a bidding frenzy: The banks often under-price repossessions, hoping to generate excitement, attract multiple bids and sell them quickly. The problem is, as in any auction-type sale, bidders get excited and pay too much.

“Remember,” said Sharga, “there are 800,000 REOs in the banks’ inventories. There’ll be another home to bid on tomorrow.”

Underestimating repair costs: Take full advantage of the home inspection and don’t delude yourself about much the repairs will cost.

“Take along someone who can give you a good estimate of how much repair costs will come to,” said Sharga.

Redfin coaches its agents to warn buyers to factor in a cushion of 10% to 20% of the purchase price to pay for unexpected repairs. “If you end up not using it, go on vacation after 6 months,” Wiener said.

Not knowing what comparable properties cost: This is important in any market but especially in this endeavor. In high foreclosure areas, prices can be eroding very quickly. You want to have the latest homes sale prices on repossessed properties and try to keep your bid comparable or lower.

Buying in a neighborhood flooded with foreclosures: This is most important for people buying for the short-term. Any neighborhood saturated with REOs and foreclosures may be headed for further price falls. If you’re planning to relocate within a few years or buying a bigger house, that could mean selling at a loss. A better bet, if you can find it, is to buy the only foreclosed home in an otherwise stable community. That’s more likely to hold its value.

Not having financing in place: If you don’t have a pre-approved mortgage, you’re really not in the market. “You have to be able to move quickly,” Sharga said.

Banks don’t want to dilly-dally on sales; they’re losing money every day that homes sit on the market. That means they’ll often jump on the highest bid with the best financing already in place.

Having a loan beforehand carries another advantage: It tells you how much credit you have available. You won’t spend time shopping for homes that are too expensive.

Remember that pre-approved financing is different from pre-qualified financing; it means the loan is ready to go. Pre-qualified is more like an opinion of a loan officer and there’s still work to be done before final approval.

Posted in: Foreclosure
Tags: auction, bank owned property, banks, foreclosure properties, foreclosure sales, Real estate

Foreclosure filings fell slightly in Wisconsin during April but continued at an elevated pace for the year.

There were 2,510 filings statewide in the month, down from 2,543, or 1.3%, in April of last year, according to a preliminary report Monday from Madison-based ForeclosureAlarm.com.

Through the first four months of this year, 10,319 foreclosure filings had been made. That compares with 10,263 during the same span in the record year of 2009.

“There are plenty of foreclosures that remain,” said David Leibowitz, a mortgage foreclosure defense attorney and bankruptcy lawyer with LakeLaw in Kenosha.

“I think we’re seeing stabilization at a high level, and it’s going to continue at a high level for the rest of the year – maybe the beginning of next year as well,” Leibowitz said.

The employment situation needs to improve significantly before a serious drop in foreclosure occurs, he said.

On the brighter side, there were 12.6% fewer foreclosure filings in April than in March this year statewide, according to statistics from ForeclosureAlarm.com.

Court records show a 1.7% increase in April filings in the region that includes Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Washington and Waukesha counties – to 1,084 filings from 1,066 in 2009. More than half were in Milwaukee County, where 605 foreclosure actions were filed, up from 579 in April 2009.

April foreclosure filings in other counties showed: Kenosha, 102, compared with 109 in April of last year; Ozaukee, 19, down from 30; Racine, 121, up from 113; Walworth, 68, down from 76; Washington, 55, up from 49; and Waukesha, 114, up from 109.

Posted in: Housing Market
Tags: forclosure, foreclosures, milwaukee county, mortgage foreclosure, walworth, waukesha counties

For the third straight week, mortgage rates went nowhere fast.

The benchmark 30-year fixed-rate mortgage edged down 1 basis point this week, to 5.21 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.45 discount and origination points. One year ago, the mortgage index was 5.23 percent; four weeks ago, it also was 5.23 percent.

The benchmark 15-year fixed-rate slipped 1 basis point, to 4.54 percent. The benchmark 5/1 adjustable-rate mortgage fell 5 basis points, to 4.37 percent.

Up by the bootstraps
For the first time in two years, the U.S. housing market is going to have to stand on its own feet. After April 30, new homebuyers no longer will be eligible for a federal tax credit of up to $8,000 (for first-time buyers) or $6,500 (for move-up buyers). The credit’s sunset marks the end of a string of homebuyer tax breaks dating back to the spring of 2008.

For Dick Lepre, the withdrawal of stimulus can’t come soon enough. “It makes no sense to me to ask if housing is on a path to recovery if it is still being supported by the government to the extent which it presently is,” says Lepre, senior loan officer at RPM Mortgage Inc. in San Francisco.

Jim Sahnger, a mortgage planner for Palm Beach Financial Network in Stuart, Fla., agrees that years of government incentives make it “difficult to say just where we are right now,” in terms of the housing market’s true overall health.

Now that the stimulus is being withdrawn, “I believe we will see a pause” in housing activity, especially among first-time homebuyers Sahnger says. “Housing prices could decline a bit before we resume an incline.”

Mixed signals
Some recent reports suggest housing finally may be on the mend. In March, new-home sales surged 26.9 percent, the biggest monthly jump in nearly a half-century, according to the U.S. Commerce Department.

In addition, nationwide home prices recorded a modest gain in February, the first year-over-year increase in more than three years, according to the S&P/Case-Shiller Home Price Index.

But any potential housing recovery faces stiff headwinds. Despite the year-over-year home price rise, home values actually fell 0.9 percent in February when compared with January. And RealtyTrac says foreclosure filings jumped 19 percent in March, the highest monthly total in the report’s five-year history.

Regardless of housing’s true state of health, Lepre believes further government efforts to prop up sales would be “fiscally irresponsible” and counterproductive in a market where housing prices remain “at an unnaturally high level.”

“People still are paying too large a percentage of their income for housing,” he says. “It is time to believe in markets and let them take their course.”

Rate forecast
Mortgage rates continue to remain low, though, defying widespread expectations.

Many forecasters predicted rates would rise in the wake of the Federal Reserve’s recent suspension of its nearly 15-month-long campaign to reduce homebuyer borrowing costs by buying up $1.25 trillion in mortgage-backed securities.

Instead, rates have remained locked in a tight range. Sahnger and Lepre agree that private investors have stepped into the vacuum left by the Fed and are purchasing mortgage-backed securities, which look more attractive than they have in recent years.

“With underwriting standards as they are, the quality of loans being originated is far superior to what we had and knew about in late 2008,” Sahnger says. Though he adds that he believes rates “inevitably will move higher.”

Dan Green, a loan officer with Waterstone Mortgage in Cincinnati, echoes that sentiment. He says today’s low mortgage rates are the result of investors fleeing to the relative safety of mortgage bonds in response to global turmoil ranging from the debt crisis in Greece to economic disruption caused by the eruption of a volcano in Iceland.

“Mortgage rates are low because of safe-haven buying, and buying like that doesn’t last long,” says Green, author of TheMortgageReports.com.

He adds that rates “are poised to soar higher. Rate shoppers should treat today’s market as a gift.”

Posted in: Housing Market
Tags: 30 year fixed rate, 30 year fixed rate mortgage, adjustable rate mortgage, federal tax credit, first time buyers, fixed rate mortgage, government incentives, mortgage index, mortgage planner, mortgage rates

One of the components a lender uses to help determine what loan amount to approve is your down payment. A down payment not only serves as a commitment on a borrower.s behalf to make good on a loan, but acts as a lender.s guarantee to minimize risk in case a borrower defaults on a loan. The more of your own cash that you can put down for a loan, the easier it is to qualify for a higher loan amount or a lower mortgage payment.

Alternative sources of funding
Since most borrowers do not have large cash reserves on-hand for a down payment, there are other alternative sources for funding. Besides tapping into your own savings accounts, other resources may include friends, relatives, 401(k) plans, proceeds from stock sales, appraised assets, even a co-signer.

Many cities, looking to expand their communities, even offer their own down payment subsidy programs for cash-strapped buyers. It.s not uncommon to be gifted $5,000 to $10,000 without expectation of re-payment.

Loan-to-value ratio
A down payment is always expressed as a percent of the sales price and often referred to by lenders at the .loan-to-value ratio. or LTV. For instance, a $250,000 mortgage with an LTV of 80 percent would require 20 percent down or $50,000. Using a down payment calculator can help you see what influence a different down payment can have on your monthly mortgage.

Other down payment options
Some banks even offer zero-down percentage loans which require no down payment. These types of loans are typically directed at first-time buyers with good credit who are qualified to make the monthly payment but cannot come up with a down payment. However, without a down payment the buyer has no equity in the house and the lender is at greater risk, so the interest rate could be higher.

Another alternative to buying a home without committing to a down payment is to consider a lease option to buy. As a renter, you have an option anytime during the term of the lease, to buy the property at an agreed upon price from the owner. In some instances, the money you.ve put toward rent can be fully or partially applied toward the down payment.

Sellers can also assist buyers with their down payment. By offering a carry-back mortgage, sellers can sell their house faster in a competitive market and buyers can purchase a home they otherwise might not be able to afford.

Posted in: Home Buying
Tags: borrowers, buying a home, cash reserves, co signer, first time buyers, lower mortgage payment, payment options, sources of funding, value ratio