Frequently Asked Questions

Most first-time homebuyer programs use a percentage of your total monthly gross income to determine affordability, which ranges from 28 to 31 percent. You also need to consider your other debts (debts that have more than 10 months worth of payments remaining) and calculate that into the formula. Make sure sure this debt is not too high because it would hinder your affordability.

First-time homebuyers have a combination of local, state and federal programs to choose from. Examples are the Federal Housing Administration (FHA — a federal insurance program), USDA Rural Development, which offers both direct and indirect loan products, along with rehabilitation loan programs. Iowa Finance Authority (IFA) offers a variety of down payment assistance programs, and local nonprofit housing organizations like Community Housing Initiatives, can periodically have assistance programs. 

Purchasing a home is most likely the most substantial purchase you will ever make, so you need to make sure you buy it with the safest mortgage possible. This would be a fixed rate mortgage, which can come with different lengths — 15, 30 and even some programs of 33 or 40 years. 

This means during the selected timeframe the interest rate can never change causing your payment to fluctuate. Community Housing Initiatives, Inc. never recommends using an adjustable rate mortgage unless you can guarantee the ability to either pay the mortgage off early or refinance into a fixed rate product within five years.

If you are having the bank pay your property taxes and/or insurance, then you have what is called an "escrow account" with your lender where you are paying 1/12th of your property taxes and insurance every month with the one mortgage payment you make, and the bank is putting those funds into an account to hold for payment until the payment is due. The bank then sends the funds to pay the taxes and insurance. When your property insurance and taxes increase, the bank needs to adjust the amount it is collecting each month to ensure there is enough in the account to make the payments.

Yes, if you have no credit history then you can seek a lender who will qualify you with what is called "manual underwriting" where they can take letters from your landlord, utility companies, daycare providers, or if you pay child support. They can use these methods to quality your payment history without the standard scoring system. WARNING: there are some lenders who will not provide this service, so be prepared to make several calls.

As for bad credit, yes, you can still buy a home. Credit can be repaired but do not fall for a company who wants you to pay it a huge fee to do so. Most issues can be fixed by you with a little work and a lot of patience. Issues such as bankruptcy or  a previous foreclosure simply need time to make purchasing a home possible again. You can seek the assistance of a U.S. Housing and Urban Development (HUD) certified counselor, like Community Housing Initiatives, for guidance on how to do this.

Possibly, if you have the cash flow to maintain the long-term payments. Most of the time a lender will work with you to get caught back up on your late payments and fees. If you have overcome a hardship that caused you to miss payments and are now back to work and have a controlled monthly budget showing a decent surplus in cash every month, then lenders typically will work out a repayment plan with you.

 If you have undergone a hardship that has permanently changed your income and with a little adjustment to your interest rate or term of your loan, then most lenders may offer you a modification of your existing loan that will make your payment affordable again.

There are some government initiated programs that can assist in this process, too. Community Housing Initiatives recommends individuals speak with U.S. Department of Housing and Urban Development (HUD), such as Community Housing Initiatives, to see what is possible for your situation.

A modification is when something is changed on your existing loan you have with a bank. If the bank were to change the interest rate (on a fixed rate mortgage) and add time (example: If you only have 10 years left on your mortgage and the bank extends it out 20 years) then it would have modified your loan. This option is only used when you can show a hardship that has caused you to fall behind on your payments and cannot qualify for a new loan or refinance. 

A refinance is when the bank closes your existing loan and creates a new one. This is the typical method for receiving a better interest rate or payment.

 A short sale is when you owe more on your mortgage than the house can bring when sold. Example: If you owe the bank $100,000, and you are only able to receive $90,000 on a sale of the property, then the bank will accept the $90,000 plus the realtor's commission as payment in full on the mortgage. You will then no longer owe the bank anything on the house. You will be sent a 1099 for the amount written off by the bank. Be prepared for this on your taxes. 

A deed-in-lieu is when you turn over the deed and keys to the bank and walk away from the house. Banks sometimes offer you cash for this option, called "keys for cash." The reason a bank would be willing to do this is if you can show that you can no longer make the payments and have tried to sell the house and cannot receive an offer. By doing this, you can save the bank the expensive legal fees and time lost-cost by doing this early minimizing the lender's loss.