First Time Home Buying Simplified Episode 5
Hey everybody Scott DiGregorio here, your Mortgage Guy, talking to you this time about being a first-time homebuyer and downpayment assistance. Very often those two things go together. There’s a lot of misinformation out there about down payment assistance.
When you were young, did your parents ever tell you, “there’s no such thing as free lunch”? Well, I’m here to tell you that there is no such thing as a free lunch and there are programs out there where they give you the downpayment assistance money and you don’t have to pay it back. And you’re thinking now, “man that’s the best deal in the world.” Watch out for that because on most of those programs the interest rate on your mortgage can sometimes be as much as a point or more higher. A full percentage higher than market rates, so if the market rate is 5, you’re at 6. If market-rate a 4, you’re at 5. That’s not free, and we come back to the fateful, “there is no such thing as free lunch”.
Now, don’t get me wrong! It may still be a sensible plan for you, but it’s far from free. There are other programs out there where you actually have to pay the money back and sometimes that gives you a lower interest rate on the bulk of the mortgage.
Very often when I run those numbers it makes sense and in addition to that, there’s county money. Now the county money doesn’t impact your interest rate and you don’t have to pay it back. However, in those regards, and in almost all these cases, there is always some sort of restrictions. For example, maybe you have to live in a house for 10 years and keep that mortgage for 10 years. So if you try to refinance or sell within 10 years you’ve got to pay it back. Sometimes, you’ve got to pay back all of it sometimes it’s a prorated portion. But either way, there’s always more behind the scenes.
So please don’t fall for those advertisements that people are just giving away free money. It doesn’t work that way. It’s money! Nobody’s giving away money. If you have any questions, reach out to me. Hopefully, now I’ve given you some information and broken up some of the myths.
My name is Scott DiGregorio. I’m your Mortgage Guy. Look forward to speaking with you. Take Care.