home financeHome Finance mortgage loans through the Department of Housing and Urban Development and guaranteed by the Federal Housing Administration are available (depending on where you live) with “zero down payment”, $100 down, and other attractive incentives that make it easier for cash-strapped home buyers to purchase their first homes.

Open to first-time home buyers, these home finance plans can benefit prospective consumers who participate in FHA-approved homeowner education counseling and who meet FHA underwriting requirements.

Securing a down payment is the most significant obstacle to home ownership and a particular problem for minority buyers. To offset the zero down payment, mortgage costs would be higher than for a standard FHA loan with a 3 percent down payment requirement. Closing costs could be rolled into monthly payments. The one potential problem with the zero down payment program in many states is that there is a shrinking inventory of homes that are priced below the loan limit threshold that the FHA will guarantee.

In Sacramento, California for example, a house must cost less than $280,749 in order to qualify for an FHA loan. The median resale price for an existing Sacramento County home in October was $241,000, while the median price of a new home was $337,000.

Adjustable-rate mortgages are attractive to buyers when interest rates and/or home prices are rising, as they typically have lower interest rates than fixed-rate loans and therefore require lower monthly payments. They are also easier to qualify for than fixed-rate loans. Buyers who choose ARMs take on some risk, because if rates rise their monthly payments will eventually increase, depending on the terms of their home finance loan.

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