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Buying your first home evokes all kinds of warm, fuzzy emotions: pride, joy, contentment. But before you get down to the good stuff, you need to whip up a down payment – a colossal sum if you follow the guide’s advice for saving 20% ââof the cost of a home.
Here are five creative ways to build your down payment faster than you ever imagined.
1. Crowdsource your dream home
You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who said you can’t outsource your first home? Forget the traditional register, fine china and 16-speed blender. Use sites like Feather the Nest to increase your down payment.
2. Ask the seller to help you (really!)
When sellers want to close a deal quickly, they may be willing to help buyers pay closing costs. Less closing costs = more money you can apply to your deposit.
“They’re called sellers’ concessions,” says Ray Rodriguez, regional director of mortgage sales for the New York metro area at TD Bank. Talk to your real estate agent. They might help you negotiate something like 2% of the overall selling price in dealerships to help cover closing costs.
There are limits to the concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae secured loans, the limits vary between 3% and 9%, depending on the ratio between the amount you put up and the amount you finance. Individual banks have varying limits on concessions.
No matter where they are paid, concessions must be part of the purchase contract.
Related: New Law Protects You From Unexpected Closing Costs
3. Examine government options
The US Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including help with down payment and closing costs. These are usually available for people who meet specific income or location requirements. HUD has a list of state-specific links that direct you to the appropriate page for information about your state.
HUD also offers profession-based help. If you are a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under their Good Neighbor Next Door sales program for a 50% discount off the HUD estimated value. of a house in the “revitalization zones”. These areas are designated by Congress for homeownership opportunities. And if you qualify for an FHA insured mortgage under this program, the down payment is only $ 100; you can even finance closing costs.
For veterans, the VA will guarantee a portion of a home loan through commercial lenders. Often, no down payment or private mortgage insurance is required, and the program helps borrowers secure a competitive interest rate.
Some cities also offer homeownership assistance. âThe City of Hartford has the HouseHartford Homebuyer Assistance Program which offers down payment assistance and closing cost assistance,â says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners at Avon, Connecticut. The program partners with lenders, real estate attorneys and homebuyer’s advice agencies and has helped more than 1,300 low-income families.
4. Check with your employer
Employer-Assisted Housing (EAH) programs help connect low- and moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $ 8,000 for down payment and help with closing costs. The loan is interest free and borrowers have 10 years to repay it.
Washington University at St. Louis offers forgivable loans to qualified employees who wish to purchase housing in specific areas of the city. University employees receive the lesser of 5% of the purchase price or $ 6,000 for down payment or closing costs.
Ask your employer’s human resources or benefits staff if the company is part of an WASH program.
5. Take advantage of special lender programs
Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say the biggest misconception [of home buying] is that you need 20% for the down payment of a house, âsays Rodriguez. “There are a lot of programs that need a total of 3% or 3.5% off.”
FHA mortgages, for example, can require as little as 3.5%. But keep in mind that there are upfront and monthly mortgage insurance payments. âMortgage insurance could add $ 300 more to your monthly mortgage payment,â says Rodriguez.
Some lender programs go even further. TD Bank, for example, offers a 3% down payment without a mortgage insurance program, and other banks may have similar offers. âCheck with your regional bank,â Rodriguez says. “Maybe they have their own first-time buyers program.”
Not so intimidating after all, is it? There is actually a lot of help available to many first-time home buyers who want to make their dreams of home ownership a reality. All you have to do is do a little research and start looking at those real estate listings!
* Content originally published by REALTOR.com, supplied by PAAR **
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