For those with relatively low income, homes can be much harder to buy outright. Those who need to secure a low income mortgage agreement can benefit from some time-tested strategies for avoiding high risk of foreclosure.
Amass a Large Down Payment
Generally, the more money the borrower puts down up front on the house, the better. A bigger down payment can alleviate some of the high monthly payments that cause some foreclosures. Having equity is like a solid savings plan, as long as property values remain stable.
Look at FHA and Other Government Programs
Since the U.S. housing market crisis, there are even more government programs around to help low income home buyers. One of these, the FHA program, existed before the financial trouble around housing. It’s extremely helpful for any lower income home buyers. The FHA loan program includes government insurance for mortgages, allowing a smaller down payment and an easier approval for a mortgage.
Choose a Fixed Rate Mortgage
Although some lenders try to steer borrowers toward an adjustable rate mortgage, lower income buyers should stick with the safer fixed rate option. Adjustable rate mortgages can tend to spiral out of control with changes in the prime lending rate, where monthly payments can actually spike, causing the threat of foreclosure.
Consider a Co-Signer
A co-signing agreement can help for some lower income home buyers who need interest rate relief for their purchase. However, these agreements can be tricky. When using a co-signer, make sure all parties understand the agreement thoroughly.