Regardless of your experience with home ownership, you probably have plenty of questions
surrounding your down payment. What is truly required for a down payment? How can you
best source down payment assistance? Let's answer those questions here.
1. How Much Do You Really Need for a Down Payment?
There is a long-standing misconception about down payment requirements. A recent survey from Fannie Mae shows only 17% of consumers know the minimum options are actually between 1-5% of the purchase price. 40% don't know how much they need at all. There are many mortgage loans available that require as little as 3% down for first-time buyers. Some only ask for 3.5% down from repeat buyers. There are even loans available for veterans that provide 0% down payment options too. The reality is, you don't always need a 20% down payment to buy. That puts home ownership in a much closer reach for many potential buyers.
2. How Can I Get Help with My Down Payment?
Regardless of the loans available, many buyers still need assistance with a down payment. The great news is there are a lot of ways to tap into down payment assistance options. Here are just a couple of them:
Assistance from Family Members
The National Association of Realtors (NAR) said, "a third of recent first-time buyers received
down payment assistance from family members." They also mentioned, "the average net
worth of those aged 75 and over stands at $264,800...They just might offer the boost the next generation needs to become homeowners." That means one of the ways to find help with a down payment is to accept a gift from a family member. If this is an option for you, make sure you talk to your loan officer before you accept the money to ensure you document the process the way your loan requires. This way, it will be received properly and you will still have the ability to qualify.
Down Payment Assistance Programs
The reality is, not everyone has a loved one or a family member who can provide help with
a down payment. There are, however, more than 2,500 down payment assistance programs
available (by local areas like city, county, or neighborhood), and some of them are even
specifically for first-time buyers. The gap, as mentioned in the survey, is "only 23% of consumers are familiar with low down payment programs."
That's why it is so important to get familiar with these options by doing your homework before you plan to buy a home. Determine what is available in the area you ultimately want to live so you have all the necessary details to take advantage of the best option for your family.
If buying a home is one of your long-term goals, you may be able to get there sooner than you think by tapping into one of the many down payment assistance programs available.
~Information taken from Keeping Current Matters, Things to Consider when Buying a House, Fall 2019 Edition