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Why is a 20 percent down payment important?

You can buy a home with less than 20 percent down. The Federal Housing Administration (FHA) recently lowered down-payment requirements for mortgages it insures to as low as 3.5 percent to make it easier for buyers to get into the market.

Buying a $250,000 home with 3.5 percent down would mean you’d need to bring just $8,750 to the deal. That’s probably less – a lot less – than you spent on your car.

Why, then, do we hear so much about saving up 20 percent of the purchase price – $50,000 cash for that $250,000 home – for a down payment? Why not a down payment of 3.5 percent? Or five percent? Or, if you want more of your own money (equity) invested in the home, why not just put 10 percent down?

Good question. Here’s the reason: If you contribute less than 20 percent down to a home purchase, you’ll be required to buy mortgage insurance. It protects the lender, not the buyer, from the chance you’ll fail to make your payments.

Conventional mortgages require private mortgage insurance (PMI). Private mortgage insurance typically costs between 0.5 to 1 percent of the entire loan amount on an annual basis. On a $100,000 loan this means the homeowner could be paying as much as $1,000 a year, or $83.33 per month — assuming a 1 percent PMI fee.

With an FHA mortgage, the insurance is called a mortgage insurance premium (MIP) and you must keep paying the premium as long as you own the loan. If your MIP is $200 per month, and the life of the loan is 30 years, you will end up paying over $70,000 in MPI for the life of your loan. There is also an up front mortgage insurance premium that can be added into the loan or paid separately. You must refinance or sell the home to get out of the FHA insurance.

With mortgage insurance in mind, you can understand the reasons to save up 20 percent, or as much as possible before taking out a mortgage. Click here for steps to help you reach your savings goal.

FICO announces availability of of credit scores

FICO anounced that it had reached an agreement with the three main credit reporting agencies (TransUnion, Equifax, and Experian) that will allow housing and financial counselors to share with their clients their credit scores.

Counseling providers are generally unable to provide their clients with credit reports or scores bought on the client's behalf due to contracts with the crediting reporting agencies. These contracts are generally a three-way agreement between the counselor, FICO and one of the credit reporting agencies, and prohibit sharing the report or score with any other entitiy, including the client.

More information about the initiative is available here.

Project Rental Assistance Program Gets Funding

Alaska has been awarded $7.7 million from the U.S. Department of Housing and Urban Development (HUD) to provide permanent supportive housing to 200 Alaskans with disabilities. This Section 811 Project Rental Assistance program is designed to create more efficient and effective use of housing and health care resources to substantially increase integrated affordable rental housing units for extremely low income persons with disabilities. This will be accomplished within existing, new, or rehabilitated multifamily properties with a mix of incomes and disability status.

Supportive housing combines affordable housing with support services to promote recovery and self-sufficiency, and has been used as a tool to improve care, improve health and lower health care costs for people who face some of the most significant barriers to housing and health care.   

This program is a partnership between the Alaska Housing Finance Corporation (AHFC) and Alaska Department of Health and Social Services (DHSS). With an additional $5.8 million in matching funds, this program will provide rental assistance and enhanced support services for an initial five year period with continued funding available upon federal appropriation.

For more information about the program, click HERE.

Learn how energy efficiency adds value to residential homes

Take a break from the busy summer and join AHFC in July. AHFC is sponsoring several classes about residential home energy efficiency valuation in Anchorage and Fairbanks.

Building technology has changed dramatically in the last 10 years. New building methods result in houses that are healthier and cost less to maintain. The most notable benefit is in the low utility costs owners experience on a monthly basis. Those monthly savings result in hidden value: value that buyers, real estate practitioners, lenders, builders and appraisers are increasingly recognizing.

The classes will be taught by renowned real estate appraiser instructor Sandra Adomatis. Her new book "Residential Green Valuation Tools" is quickly becoming an invaluable resource for anyone in the industry wanting to learn more about high-performance home valuation.

July 6, 2015 - Overview of an Energy Efficient Market: Hidden Value
6:30p.m. - 8:30p.m.

July 7, 2015 - Introduction to Green Buildings: Principles and Concepts
8a.m. - 5p.m.

July 8, 2015 - Case Studies in Appraising Green Residential Buildings
8a.m. - 5p.m.

July 9, 2015 - Introduction to Green Buildings: Principles and Concepts
8a.m. - 5p.m.

July 10, 2015 - Case Studies in Appraising Green Residential Buildings
8a.m. - 5p.m.

All 8 hour classes cost $40 each and will offer continuing education credits for appraisers and builders, as well as real estate professionals pending approval from the Real Estate Commission. A HP-12C or equivalent calculator is required for these classes.

Introduction to "Green Buildings: Principles and Concepts" and "Case Studies in Appraising Green Residential Buildings" were developed and are owned by the National Appraisal Institute. Copyright 2010 Appraisal Institute. All rights reserved.

For more information please contact Jimmy Ord (907)330-8446. To register for classes, visist: www.ahfc.us/classes