There is a misconception among would-be Home buyers that you must have $10,000 to $20,000 to purchase a home, this is absolutely NOT true. The purpose of this post is to help you understand that there are Loan programs available that reduce the amount needed for down payment and often times closing costs too.
I am going to teach you the truth about down payments, whether you're a First Time home buyer or buying your second home, Down Payments are there, but they don't have to break the bank, Here's why ...
Let's start with First Time Home Buyers
Experience has shown me that the #1 reason First Time Home Buyers are not buying a home is simply because they do not know about these programs and are not aware that they may be able to own a home. There are many programs available, hundreds, and while each one has it's own qualifications, it's been my experience that most First time home buyers would qualify for at least one.
There are programs designed to help all types of buyers , with income limits up into the $90,000's. These are programs which are interest only, usually with deferred payments (no payments) and place a second lien on the home.
There are also specialty programs for Teachers, Police Officers, Fire fighters, Health Care Employees and Veterans. All of these loan programs are designed to help you buy a home, many are sponsored by local government agencies, others are non profits.
I have helped buyers get into a home with very little money out of their pocket, how little? As low as Zero for some, others have had to spend $500, usually a buyer will need less than $2,000. Factors depend on the price of the home, the interest rate of the loan program and the credit score of the buyer. Need more information on Credit Scores? Check out my Guidance Post "Building Your Credit Score" .
Are you Selling and Buying another home?
If you are selling a home and buying another chances are you have a nice chunk of equity that can be applied to the next home. Most of the time people don't want to use all of their gained equity to put down on the next home, and that's okay because usually you don't have to.
There are a lot of reasons why you wouldn't want to tie up all of the cash into the new purchase. Sometimes it's best used to pay off other debts, other times it's needed for remodeling the next house or putting in a pool.
Repeat Buyers may get Down Payment Assistance too
It's true, depending on where you live there may be a down payment program to assist you with the down payment and closing costs, regardless of how much money you have in the bank. I always run my clients through several program scenarios just to see what's available, and what makes sense.
There is always a Catch, right?
Down Payment programs are no exception. There are usually extra fees involved that handle the processing of the second deeds, assistance paperwork and any filings that may be needed. These programs often come at the expense of a increased interest rate, perhaps 1/2 to 1% above the average market rates.
The upside is that these can help you get into a home today, using very little of your own money and allow you to have a place that's yours. Something to think about is - what is the cost of waiting?
Here's what I mean by this - It's great in theory to save up for a large down payment of 20% or more. However, when prices are on the rise, saving quickly enough to keep up with the pace of price gains can be extremely difficult.
In times such as these, why not let the market build equity for you instead? Owning a home in a market where prices are rising can build equity much faster than most people can save. For example, a $200,000 home that appreciates by 3% a year will gain $500 per month in equity, that's $6,000 a year.
The benefits of buying now rather than waiting are many-
It pays to view using Down Payment assistance and Mortgage Insurance as a means to an end. In all likelihood, it will be a temporary cost, you're willing to take that cost now because it will actually save you in the long run.
Would you like me to help you discover what Down Payment Programs are available for you?