Edith: We are planning to buy our first home. Between us we have good income and pretty good credit, but not all that much cash for a down payment. Also, we are not married. Does that make a difference? What kind of mortgage should we be looking for? — P. I.
Answer: Mortgages insured by the Federal Housing Administration, also known as FHA loans, are often used by first-time-buyers. The credit score requirement may be slightly lower than that of other mortgages. They usually involve at least a 3.5 percent down payment, and you'll pay a monthly insurance premium to protect the lender in case you were to get into trouble. (Someday, when you think you have at least 20 percent equity in the house, you could contact your lender about dropping that insurance.)
The fact that you're not married won't make any difference with an FHA loan. And if you're short of cash, some of your closing costs — expenses to place the loan — could be added to the amount you borrow.
If you want to buy a house that needs extensive repairs, you might look into a special FHA program that allows you to borrow additional money at the same time to make prompt improvements.
If one of you is a veteran, Veterans Affairs-guaranteed mortgages are available with no down payment. Nor is there any monthly charge for the guarantee. But if the buyers are not married, the veteran must prove he or she has enough income to carry the whole debt if need be.
Both FHA and VA lenders will allow the seller to pay part of the closing costs, and most sellers know they may be asked to do so. Both involve inspections that can sometimes end up requiring the seller to make repairs before the loan is granted.
You may want to start by contacting your own bank to see what loans it handles.
In some areas, buyer-friendly mortgages are available directly from the U.S. Department of Agriculture. They're intended for lower- to-middle-income borrowers who are buying in rural areas, including some suburbs. They require no down payment; mortgage insurance premiums are lower than that of FHA loans; and the entire purchase price can be financed.
Then there's the possibility of a purchase-money mortgage, a mortgage some sellers offer to buyers to finance the deal themselves. If they are willing to wait and collect their money month by month, you may see that mentioned in the listing information. One alert: You wouldn't have the protection of an FHA or VA inspection, so you might make your written purchase offer "subject to a satisfactory report" by a home inspector you hire.
Inspecting New Construction
Ms. Lank: I am in the process of buying a new home for around $600,000. My real estate agent is suggesting I hire a private inspector to inspect the home during the three phases of construction at an estimated cost of $1,000 to $2,000. Is it a good idea to spend this additional money? — askedith.com
Answer: By all means, yes. Hire an inspector to keep an eye on the construction on your behalf. That's a very small additional investment, and in return you'll have an expert who is legally bound to putting your interests first.
Readers Offer Their Home
Dear Edith: We may have a solution for your readers who were looking to downsize and couldn't find something new in a development with a variety of home sizes. We did it a few years ago to a three-bedroom, two-bathroom ranch home in a multigenerational newer development.
Now we are hoping to relocate to Virginia to be closer to our first great grandchild. Our house might work for your reader. Please feel free to give the reader our email address. — A. and A. G.
Answer: Thanks for thinking of those folks. Nice to hear you found the kind of neighborhood they are looking for, but there are at least three problems here.
First off, a version of the column is syndicated across the country, and those folks don't live in your area. Second, I never put readers in touch with one another — too much responsibility. And lastly — this one is my problem — my first great-grandchild is hundreds of miles away and I won't be relocating.
Becoming an Angel
Dear Edith: I am 60 years old. My two children are beneficiaries. When I become an angel, will they have trouble selling this property with my name on the deed? — M. L. C.
Answer: No problem, Angel. There's nothing to worry about.
Contact Edith Lank at www.askedith.com, at [email protected] or at 240 Hemingway Drive, Rochester NY 14620.