When my husband and I were in the market for our first home, we were excited to take advantage of some of the first time home buyer programs we had heard so much about. After all, we were in fact first time home buyers and this would be the only time we’d be able to claim this title. We definitely wanted to get in on a mortgage with a low interest rate and/or lower fees so our monthly mortgage payment could be a manageable amount. We both work full time right now, but in a couple years we plan to have children and we’ve decided that I will be a stay at home mom at that time. So with only one income on the horizon in a couple years and this house being the one we will live in and make mortgage payments on at that time, we were definitely interested in the lowest mortgage payment we could acquire.
Our mortgage loan officer told us about a particular first time home buyer program that was one of the best. Basically all we had to do was go to this class about home buying for a few hours and then we would get a certificate and that would make us eligible for the program. In this program we could get a mortgage with no down payment, no private mortgage insurance, and a low rate of 5.875% (which could have been even lower if we decided to buy it down with points). That sounded wonderful. I did the math and figured out what house we could afford based on what the payment would be that would fit into our one income budget. Then we signed up for the class and started looking at houses.
On a particularly snowy January Saturday (on which we wanted to stay home and play in the snow) we made our way to this first time home buyers class. We learned a little bit about the house buying process (not much more than we already knew due to personal research) and were able to meet some people in the same boat as us. After 5 hours of our Saturday spent sitting in this little room listening to realtors and bankers talk and talk, at the end of the class we learned that we actually made too much money to participate in the program. Funny, I don’t remember it being called a “Low Income First Time Home Buyers Class.” They apparently left that part out.
Now mind you, we made too much money per year by about $1000. I can’t tell you how frustrating that was.
We tried to fight it and find every way around this. There were several factors of our income that made this a little different and we tried to play all those cards. First of all, I didn’t get vacation or sick time at my job, meaning a day off was a loss of pay for me, thus decreasing my yearly salary. And I don’t get benefits at my current job. Instead I just get paid an extra amount of money per hour, which in theory shouldn’t count as income because it would be directed towards medical insurance. In addition, my husband was on active military duty and about half of his pay was tax free (housing and food money). None of these factors made a difference because we were $1000 over the yearly limit.
This left a sour taste in my mouth from programs like this, especially since I felt it was very misleading. I understand that people with lower incomes need some assistance with home buying and I have no problem with that at all. I think they need to be clearer about it up-front though that these programs are for low income earners.
In theory, since we make more than the minimum, we should be able to afford a house without using one of these programs. But that theory doesn’t work in our case because our need is for a low mortgage payment when our income is half of what it is now. We were in a catch 22 situation – either buy now and deal with the higher mortgage payment or wait until we were on one income in a few years and have to pay more for a house because market values went up (not to mention the loss of equity we could have gained in those years). Ultimately, we decided to deal with the bigger mortgage payment and buy sooner rather than later. I just wish the process could have been a little easier and clearer with correct marketing on the program’s part.
Image courtesy of rmcgervey