The Least Expensive Financing Plan When Buying a Home

With interest rates so low these days, more and more people are thinking about buying a new home. But how much cash do you really need to get started? And if approved, which loan is best for you?

What is the least expensive type of financing available to purchase a home today?

Today is an absolutely wonderful time to be buying a home. Everything is on sale and the interest rates are at an all-time low with 4.25% interest for a 30 year fixed mortgage. In my opinion, the best way to buy a home is with the least amount of cash out-of-pocket and that would be with an FHA loan. An FHA loan is still allowing 3.5% down payments to get into a home.

Can the seller pay the closing costs for someone who chooses an FHA loan? And if so, how much can the seller pay?

Yes, a seller can pay the buyer's portion of the closing costs. The seller is allowed to pay all of the closing costs up to 6%, with typical costs ranging from 2-3%; so 6% is more than enough. A person can literally buy a home with 3.5% out-of-pocket.

What is the maximum sales price someone can pay and still qualify for an FHA loan?

Well the maximum for an FHA loan can vary, but here in the Davidson County area is at $448,000 right now; so it would take only 3.5% out-of-pocket if you have the closing costs paid by the seller.

Are there homes, currently on the market, that can illustrate how this financing works?

Yes, I want you to see just what a couple of particular homes would cost.

1. The first example home has an asking price of $124,000; with 3.5% down your cost would be $4,372. If you had the seller pay all the closing costs your total monthly payment would only be around $750; this will vary a little bit based on the current interest rate because that does fluctuate. But this is a great example of how you can get into a home for a small down payment and then live there for $750 a month - you couldn't rent a home for that price. In fact, that price can be far cheaper than what some people are paying in rent.

2. The next home I'd like to use to illustrate financing, was purchased two years ago for $237,000 and the sellers have now reduced the price to $209,900. With a 3.5% down payment on an FHA loan, you would only need $7,350 out-of-pocket and a monthly total payment of approximately $1,280; again depending on the current interest rate.

If you're ready to buy, now is the time.

Everything is on sale; it's an incredible time to buy.