One of the most important things to consider when purchasing a new home is to consider how much money to put down. Usually, novice home buyers utilize a combination of saving for a down payment with other financial strategies.
However, the key is to find the best financial strategy that will help clear the hurdle of making the downpayment while stabilizing your future finances. If you are wondering how much you should be putting down for your first house, take a look at these points to see what options are available for you.
Low-Down-Payment Mortgages
It is a tradition for lenders to prefer at least a 20% down payment. However, there are other low-down-payment options available for first-time buyers. There are VA loans, which are supported by the Department of Veterans Affairs. There are also USDA loans, which are backed by the Department of Agriculture. Borrowers who qualify for the latter offer 0% down.
FHA loans, which are backed by the Federal Housing Administration, will allow down payments potentially as low as 3.5%.
Finally, there are the conventional loans that aren’t backed by any government agency. Down payments could potentially be as low as 3%, and if you are a home buyer with good credit, this could prove to be a good option.
State and Local Assistance
More people are realizing that states offer many down payment assistance programs that are implemented by many nonprofit organizations, employers, foundations and even government agencies. The help usually comes in the form of zero-interest loans that can be forgiven or grants. More specifically, the programs could have a potential geographic focus as wide or small as you want it.
There are many variables to consider, but in terms of getting this assistance, it is usually a matter of associating a program to a property. A home’s location and price are also important factors. Assistance with making a down payment is combined with favorable interest rates or tax breaks often. If you are having continued difficulty with how to go about making a down payment, you could consult Chenoa Fund for expert advice.
Gifts From Family
To celebrate getting a home, many buyers will often see themselves getting help from family members. In fact, according to a report from the National Association fo Realtors, 28% of buyers aged 28 and younger received gifts from friends or relatives to make a downpayment, while 21% of buyers aged 29 to 38 got a gift.
Getting gifts is an acceptable form of financing to lenders, but you will have to do more than deposit a check if you want to apply a gift to a down payment. Donors typically need to verify that they were the ones who made the gift and that they have the financial capacity to make the donation.
Depending on a variety of personal and external factors, you will be typically expected to make a down payment of around 3.5% that comes with an insurance premium of around 1.75% and an interest rate of just over 4%. You can visit the Chenoa Fund if you require more information on these matters
