seasonal jobs, such as teachers and construction workers who may not have an income during certain times of the year.
Dunagan says there are also 100% financing programs available for first-time home buyers but, in some cases, they have higher interest rates and higher private mortgage insurance costs. He says deciding whether having a higher interest rate is better than long-term renting is an important decision prospective home buyers will have to make. Christina Cowens thought the former was a better option when she decided to buy her first home in 2002. After moving from New York City to Minneapolis to take an administrative position that would advance her career in education, she thought, “[Why am I] helping strangers invest and live well off of my rent money and I’m not receiving any financial return or benefit for myself?”
Cowens found a dedicated real estate broker to structure a 100% financing deal through Countrywide Bank’s 80/20 program, in which a home buyer can get 100% financing by taking out two mortgage loans. The first loan will equal 80% of the mortgage up to $400,000 and the second will cover the remaining 20%, up to $100,000. The combined loans cannot exceed $500,000. In order to qualify for this program, the buyer’s credit score must be higher than 580. The appraisal fee is the only out-of-pocket expense Countrywide requires of the home buyer.
In Cowens’s case, the seller of the house she wanted requested an earnest fee — a deposit that indicates the buyer’s seriousness about purchasing the property — so she put up $3,000 of her own money to cover it. The seller did, however, pay the closing costs in the deal. Cowens bought her home with an adjustable-rate mortgage of 7.8%. At the time of this writing, she was considering refinancing her loan at a fixed-interest rate of 4.5% through Countrywide.
After researching the housing market in Long Island, New York, four years ago, Karen and Raphael Gordon knew what they wanted in their starter home. “We had been renting for a while, were preparing to start a family, and wanted to invest in real estate,” says Karen. “We figured we’d be here about seven years and hoped that, by that time, the house would appreciate in value.”
The Gordons stuck to their budget during their search. They looked through newspapers and visited numerous Websites and open houses but had trouble finding a home in their price range that they liked. One day, the couple was on their way back to their apartment after another frustrating open house when they passed a quaint little home in Farmingdale. “We immediately called the broker on the sign to take a look at it. It was within our budget and we both thought it had great potential, so we immediately placed an offer because homes were going so quickly,” says Karen. Although the property the Gordons fancied was appraised at $239,000, the owners of the home accepted the couple’s offer of $209,000. The Gordons were able to secure a