How Much Do I Need for a Down Payment?

Since leaving the comfort and confines of your parents’ home you have been known to rest your head in a freshman dorm, or couch-surfed or you’ve lived in a variety of rental digs. Now you need a more permanent place and there’s no way you’re going back “home”.  Now you’re finally ready to make the move. The big move into home ownership.

Home ownership is a huge decision and for first-time buyers it can be both daunting and overwhelming.  It appears, at first glance, somewhat unachievable. A common question is, “How on earth can I pull together the funds for a typical 20% down payment?”  Sometimes, it’s a case of not knowing who you should speak with and what you need to ask. Well, let us give you some insight and dispel some misconceptions. Then, we can help you find the right home and the right person for financing your new home.

CREDIT OR CASH

We all know that today’s tightened lending guidelines means you can’t buy a home with just a promise and signature. It’s clear you need to have some form of down payment, or is it?  And how much do you actually need? Must you always find 20% down? The answer might surprise you; there are many ways to buy a home with less than 20% down payment.

Research from the National Association of REALTORS® proved that needing a 20% down payment simply isn’t true. It’s a misconception that is impeding homebuyers. Rather, it’s your credit rating that has more significance than how much (or little) cash you may have on hand.

OPTIONS

Listed here are some common programs to review, but this is just a sampling. It’s not a one-size-fits-all scenario. You need to speak with a lender as they often have more flexibility with in-house personalized programs. HOMM Real Estate Services can connect you with a local lender that can find the right financing option that makes the most sense for you.  

• 0% Down – There are still two loan programs which allow one to buy a home for no down payment; the VA loan and the USDA loan. The VA loan requires the borrower to be a qualified service person or veteran and the USDA loan is for certain areas under the Department of Agriculture.
• 5% Down – Conventional loans with loan limits can allow one to buy a home with as little as 5% down. These loans do have PMI (Private mortgage insurance) which can be eliminated when the loan amount falls below the 20% threshold.
• 3 ½ % Down – FHA offers first time home buyers a good home loan for only 3.5% down payment. Again, these loans have loan limits and PMI but offer a faster entry into the housing market.

ASSISTANCE

In addition to the zero and low-down payment loan options, did you know there are down payment assistance programs available to qualified home buyers? And, these are not just for first-time home buyers.

While HOMM Real Estate Services is not a lender, we can help you find out if you are eligible for any of the down payment assistance programs. Click here to get started.

GIFTS AND GRANTS

In certain circumstances, buyers may be able to apply monies gifted to them from their parents or other family members. “Gifted monies” are identified as such if you are not required to repay the money to the donor. Most lenders will allow gift money to be applied to the down payment; provided you meet all required rules for the type of loan. For instance, the FHA 3.5% down payment can be 100% gifted money, whereas other loans require you to put down some form of down payment yourself.

NEXT MOVE

Reach out to HOMM Real Estate Services! Making the move into home ownership is achievable. And since it doesn’t always mean a 20% down payment, maybe the move isn’t quite as big as you originally thought.  Let HOMM Real Estate Services help you find the perfect place for you and connect you with a lender to discuss your options. Feel free to crunch some numbers, too.

HOMM Real Estate Services, located in the Brandon, Florida area of Tampa-Bay focused to Hillsborough, Pasco, and Polk Counties. As a full-service general real estate company, we specialize in general real estate, home buyers, home sellers, new home construction, rentals, tenants and landlords, and property management. 

Learn more about Marie Negron, her team and HOMM Real Estate Services. Call 813-684-5954 or email info.hommsales@gmail.com to get started.