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Affordable Housing Information
Topics:
Saving For a New Home
Of all the homeowners you know, how many were born rich or inherited a pile of money from their Uncle Henry? Probably none, right? So where did they get the money for the down payment and closing cost for their home?
Chances are, they got it the same way you will, through hard work and determination. It all begins with a commitment to the goal of owning your own home. Once committed, you'll be motivated to set up an effective budget, devise creative ways to manage finances, and make whatever sacrifices are necessary to reach your goal.
How much do you need to save?
As part of the HFA's Education/Prequalification Program, you learned the price range of the home you could afford and the approximate down payment and closing costs.
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Subtract your cash-on-hand from the total you need at closing. This is the additional amount you need to save. |
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When do you plan to move into your new home? The number of remaining months is the time you have left to save. |
Example. Let's say your goal is to buy a $65,000 house and you want to close within two years. Your down payment is 5% of the sales price ($3,250). We'll figure all closing costs to be 5% of the $61,750 mortgage ($3,088 rounded up). This makes your cash-to-close $6,338.
From $6,338, subtract your current savings. Finally, if you're receiving part of your closing costs as gifts, or purchase assistance through the HFA, deduct these also. What's left is the amount you need to save.
Look in the chart shown below to find the amount that applies to you. For example, if your cash-in-hand is $3,000, following across to the right you'll see that the monthly amount you need to save for the next two years is $135.78 in a MMA (Money Market Account), or $131.29 in a CD (2- year Certificate of Deposit).
| Have Now |
Balance Needed |
2.30% MMA |
5.50% CD |
| $4,000 |
$2,338 |
$95.10 |
$91.96 |
| $3,500 |
$2,838 |
$115.44 |
$111.62 |
| $3,000 |
$3,338 |
$135.78 |
$131.29 |
| $2,500 |
$3,838 |
$156.12 |
$150.96 |
| $2,000 |
$4,338 |
$176.46 |
$170.62 |
| $1,500 |
$4,838 |
$196.80 |
$190.29 |
| $1,000 |
$5,338 |
$217.14 |
$209.95 |
| $500 |
$5,838 |
$237.48 |
$229.62 |
| 0 |
$6,338 |
$257.81 |
$249.29 |
Set up your home ownership savings account. Now that you know how much you need to save each month, set up a savings account just for your new home.
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Finding more money to save
Adjust your spending to fit your priorities.
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As much as possible, spend money on only those things that are necessary. |
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Learn to make the distinction between what you need and what you want. |
Pay yourself first. This philosophy of money management can revolutionize your financial life. It means putting yourself and your family first in line for all demands on your money.
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Make the first check you write each month a check to yourself-for your home ownership savings account. |
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Next, pay your other priority items. |
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Any excess can then go for luxuries. |
Brown-bag it. If you buy lunch at work, consider packing your lunch part of the time. If you do that two days a week, at an average daily savings of only $4.00, you'll have an additional $32.00 each month.
For a current list of HFA's new home projects located throughout Broward County, call (954) 765-5311.
Earn additional income. If there still isn't enough money left to meet your new budget, consider taking a part-time job to earn the additional income you need.
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PoorFinancing Method
In order to sell their home, a seller will sometimes offer to finance it themselves under a Contract for Deed. Since you won't have to deal with a bank in applying for a mortgage, this may seem like a great way to go. But beware. You could, literally, wind up out in the cold.
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Since there's no title search, you will not receive proof that the seller has clear title to pass on to you, nor will you know about any liens that may exist against the property. |
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Since there is no title search, you will not receive proof that the seller has clear title to pass on to you, nor will you know about any liens that may exist against the property. |
Use credit wisely.
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Be on a cash-basis as much as possible and all the interest you would have paid can go into your savings account. |
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When financing items such as vehicles, put down as much as possible. This will result in lower monthly payments as well as saving on interest. |
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Whenever you use your credit card, you wind up paying interest from 12-21 percent. Do that a lot and you seriously erode your savings goals. |
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If you charge $500 on a credit card and pay it off over the course of a year, the interest (at 15%) comes to $41.55. Add that to the usual $30.00 annual card fee, and the convenience of plastic money has cost you $71.55. |
That doesn't sound too bad until you realize that by adding the $41.55 to your monthly debt ( to pay off the $500), you've also reduced your potential home ownership savings account by that same amount. Had you saved the $41.55 each month, instead of sending it to the credit card company, your savings account would have grown by $1,056.39. Of course, you wouldn't have whatever you used the credit card to purchase. This emphasizes the importance of sticking to your personal priorities.
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For purchases like furniture and major appliances, save-up until you can pay cash. Which would you prefer, new furniture and appliances where you live now or getting into your new dream home sooner? It's your choice-you choose. |
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Lender'sProgram
The Program Objective is to provide:
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Mortgage loans to purchase (and improve if necessary) existing single family properties |
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Construction loans to build single family homes that will be owner-occupied residences |
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Property must be located within Broward County. The maximum loan amount will be determined by qualifying income |
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95% financing on purchase/90% financing on refinance/ 75% financing on cash-out refinance |
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3-5% down payment |
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Fixed-rate terms available; up to 30 years |
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Below market interest rates |
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Income restrictions apply |
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Must be able to verify cash to close |
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Must be able to show stable employment for the last two years |
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All credit problems are judged on their own merits |
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No PMI Insurance (Private Mortgage Insurance). |
Glossaryof Housing Terms
Attachment. Legal seizure of debtor's property or income to satisfy a financial obligation.
Collateral. Property used as security for a loan; the property is subject to seizure upon default.
Co-signer. A second person who signs a loan or lease and assumes equal responsibility for it.
Homeowner'sClinic
Co-signing a loan
What would you do if a friend or relative asked you to co-sign a loan? Before you answer, make sure you understand what co-signing involves.
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To co-sign a loan really means to guarantee the debt. If the borrower doesn't pay, you will be required to. Think about it: the lender wouldn't require a co-signer if the borrower met the criteria for the loan. |
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If the borrower misses a payment, the lender can collect from you immediately without pursuing the borrower first. |
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You not only may have to pay the full, unpaid amount of the debt, but possibly late fees and collection costs as well. |
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The creditor can use the same collection methods against you they can use against the borrower. This includes suing you, garnishing your wages, taking your property, and so forth. |
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If the debt goes into default, that goes on your credit record. |
If you do co-sign
There will be times when you'll decide to take the risks and co-sign anyway. Few of us would turn down a son or daughter, or our closest friend. If you do co-sign, here are some things to consider
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Can you afford to pay the loan? If you're required to pay, and can't, you probably will be sued and your credit rating damaged. |
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Even if you aren't asked to repay the loan, you're obligating yourself to it. This adds to the total amount of credit you are at risk for and could keep you from getting other credit you may want. |
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Be extra cautious if the creditor asks you to pledge property-- perhaps your car-- to secure the loan. If the borrower defaults, you could lose the property. |
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Get the lender to agree to notify you, in writing, in the event the borrower misses a payment. That way you can stay on top of the situation and have time to deal with the problems before they get too serious. |
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Make sure you get copies of the loan contract, the Truth-In-Lending Disclosure, and any other papers associated with the loan. |
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Education/Pre-qualification Program
The purpose of the program is to prepare potential buyers for home ownership. This is accomplished by giving each client a plan that will result in their purchasing or building a home with the best available financing for their particular situation.
Items of business covered by the program include:
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Merits of buying vs. renting; which option will be best for the client |
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Analyze family income to determine the amount of home they can afford |
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Examine their past credit history; help them understand their spending habits |
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Assist in resolving any past credit problems that may prevent home ownership |
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Help the family establish and/or re-establish credit lines |
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Discuss with the family the requirements of obtaining a loan--from the application through the closing process |
A plan is prepared for each client that places them within the appropriate time frame of:
a. Determining that they are ready for processing (for purchase or construction), or
b. Placing them within a 6 month counseling program during which time they are contacted regarding their progress towards their individual plan of home ownership. Their file is updated and time frames are adjusted as they progress through the program.
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When the time comes for the buyer to apply to a lender for a mortgage loan, the HFA staff gives them whatever assistance they may need to make certain that everything goes as planned. |
For more information, please call the HFA at:
(954) 765-5311
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CommunityHome Buyer's Workshop
The Community Home Buyer's Workshop is an event offered to potential home buyers who are enrolled in the Education/Pre-qualification Program or have loans in process with an HFA participating lender. Its purpose is to educate clients in all aspects of home ownership, such as home selection... price negotiation ... financing ... money management ... home maintenance ... costs of owning a home, and much more.
The workshop is offered on the 1st and 3rd Wednesday and the 1st and 3rd Saturday.
Advance registration is required.
Tipsfor Homeowner's Workshop
A Tips for Homeowner's Workshop is held periodically by the HFA. The Workshop is free and open to the general public.
The 3 1/2 hour Workshop is designed to educate by providing homeowners with practical, money saving tips that may cut their property tax, utility, home maintenance costs, plus others.
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