Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment.
Here are five creative ways to build your down payment nest egg faster than you may have
1. Ask the Seller to Help (Really!)
When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.
“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. The Realtor will help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.
There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%,
No matter where they net out, concessions must be part of the purchase contract.
2. Look into Government Options
The U.S. Department of Housing and Urban Development, or HUD, offers a number of home ownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.
HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for home ownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.
For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.
3. Check with Your Employer
Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer.
Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.
4. Take Advantage of Special Lender Programs
Many lenders offer programs to help people buy a home with ZERO and or a small down payment “I would say that the biggest misconception [of home buying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”
FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.
Some lender programs go even further. Local Lender offer ZERO Down payment, TD Bank, and BB&T for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”
5. Borrowing from Yourself
Taking out a loan against your 401(k) rather than doing a straight withdrawal is a great way to increase your down payment amount.
While there are a number of ways you can borrow the money needed for a down payment, with a loan against your 401(k) , you will be paying back the principal and interest on the loan to yourself, not to some other bank. Rates are usually comparable to mortgage rates and since the principal is again, borrowed from yourself you have a variety of repayment options, to lump sums.
There’s actually a lot of help available to many first-time buyers who want to achieve their home ownership dreams. All you need to do is a little research, talk to your local Realtor who knows the are and programs available — and start peeking at those home listings!.
Source: House Logic