real estate

Stay local for home-buying help

Rural areas and smaller towns

Government help is not just for people in big cities.

The Rural Development Association, through the U.S. Department of Agriculture, is still offering assistance to those who qualify. Depending on the exact location of the home, the USDA can offer longer terms, like 38 years instead of 30, and other attractive deals.

There's also the self-help method of moving to a smaller and cheaper town if you can.

"We're coming to a time when employment will be more diverse than it used to be," says Karsten. "People can work from home or online, and if that's a possibility for you, take a look at these smaller towns."

Those who are "willing to drive, or just want a more peaceful lifestyle" can save big, he says.

Some rural municipalities offer generous help. NeighborWorks Montana provides up to $40,000 in down payment and closing cost assistance to qualifying buyers who meet income guidelines.

You can also help yourself just by moving to a less populated area. In rural Wisconsin, you can find homes with three bedrooms and one-and-a-half baths on a nice lot for less than $80,000, as long as you're willing to fix up the house, Karsten says.

Help from sellers and builders

Be sure to see what the seller can do for you.

"Ninety percent of the deals crossing my desk have some sort of seller concessions," says Ryan Stone, vice president of mortgage banking at WCS Lending in Southfield, Mich.

The seller contribution can reach up to 6 percent of an FHA loan that allows a 3.5 percent down payment, and 3 percent of a conventional loan that requires a higher down payment, he says. "So if it's a $200,000 home, the sales price is listed at $205,000, and the seller gets a check for $200,000, letting the buyer finance closing costs with that $5,000."

Spreading that $5,000 cost over 30 years definitely decreases the bite.

Meanwhile, Karsten is seeing something slightly different in his typical sale of a first home that needs a little work. Sellers can't offer much cash with that 6 percent cap, but they can do other things.

"Sellers are reducing the listed price in order to get the property sold," Karsten says. "That reduction represents the cost of the repairs. If it needs a new roof, they get it done before it closes. Obviously, there are limits to that, but I am seeing that as a general strategy."

Seller financing options appear to be on the rise, he says. In recent years, very few sellers in Waupun, Wis., have had to resort to seller financing because mortgages were easy to obtain. However, in mid-August, Karsten was at a closing for a 100 percent seller-financed home.

"Seller financing options may be appropriate in the near future for sellers who are looking to offer one more option to attract buyers," Karsten says.

Builders also are desperate. Cash concessions are common, as are offers to pay points or some closing costs. Some builders even offer a special mortgage deal. At The Granville, a new condo development in Chicago, the builder is advertising 1.5 percent off published mortgage rates for qualified buyers who put at least 10 percent down and go with a designated bank.

But just because the builder offers it doesn't mean it's the best deal for you overall. Often, the builder rate is higher than what you could get on your own.

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"I can't tell you how many times buyers go with a builder with the higher rate, get the credit and then come to a broker like me to refinance," says Stone. Alert buyers end up with the builder's cash and a great rate.

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