Buying A Home: Do Your Homework

(NAPS)—Declining house prices coupled with historically low mortgage rates and a new tax credit for first-time homebuyers seem likely to boost home sales in the months ahead. Before beginning a search for their dream house, potential homebuyers should do their homework and the first lesson should be learning which mortgage loan is right for them. Today's buyers have read about the problems choosing the wrong loan can cause, and now, more people want safe, secure mortgages that are affordable and sustainable. There are two main options for first-time buyers and others unable to make a 20 percent down payment: loans insured by the Federal Housing Administration (FHA) and loans insured by private mortgage insurers. Premiums for each are tax deductible, and the insurance may be cancelable when equity in the home reaches 20 percent. Both programs are safer than the combo or "piggyback" loans no longer in favor, but each has its own characteristics. FHA loans, for example, often require a smaller down payment, as low as 3.5 percent, and may be easier to qualify for than loans protected by private mortgage insurance. Those with less than perfect credit, or who are looking to buy in a market experiencing home price declines, may find the FHA to be the right choice. Loans with private mortgage insurance can be slightly more expensive than FHA loans, and minimum down payments generally range from 5 to 10 percent, although larger down payments may be required in some markets. While the application process is streamlined, mortgage insurance credit standards can be more demanding, making the insurance less available in markets experiencing drops in home prices. Despite somewhat higher prices and stricter eligibility standards, private mortgage insurers provide additional features that many buyers find attractive in today's market. Genworth Financial, for example, purchases job loss protection that pays up to $2,000 a month for up to six months to cover the principal, interest, taxes and insurance on mortgages of its insured customers who become involuntarily unemployed at no additional cost to them. The company also has an active Homeowner Assistance program that saved over 13,000 homeowners in financial difficulty from foreclosure in 2008 alone. Both features come at no extra charge with mortgage insurance. The company even provides discounted rates for buyers who complete an approved education program. Additional information is available at www.SmarterMI.com. First-time homebuyers are doing their research before house hunting, looking for loans that are safe, secure and sustainable.