First Time Homebuyer Information & Education

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Down payment

Down payment - "How much of a down payment do I need and can it affect the amount of my monthly payments?"

Generally speaking, the more you put down towards a home purchase, the lower your interest rate will be. If you'd prefer to keep more of your own money in your pocket during the home buying process, ask your mortgage professional about 100% financing options.

Downpayment assistance programs may be available in your area. Please contact us at 440-614-0130 for more information.

The amount of your down payment can affect your monthly payments in two ways. The more money you put down the lower your loan amount will be and you will qualify for a better interest rate. The lower interest rate in combination with the lower loan amount can drastically decrease your monthly payments.

When you apply for a 100% mortgage, a mortgage putting no money down, make sure you ask about closing costs. Many times when someone is obtaining a mortgage with 0 money down, they think that they do not have to pay any money out of their pocket at all to buy the home. However, there are still closing costs that need to be considered. There are ways to avoid paying closing costs as well. One way to avoid paying closing costs is to ask for a seller concession from the seller. This is where the seller pays for a certain amount, usually most or all, of your closing costs. Another way to avoid closing costs or to have them limited would be to see if yo can take on a higher interest rate so that you will not have to come up with any money out of your pocket at all. This option will not always work in all situations. Therefore, ask your mortgage professional what your options are for no closing costs as well as no down payment if this is something you are interested in.

There are many different mortgage programs that provide many different downpayment options. Some programs require the borrower to give 20% in order to qualify where other programs only require 3% down. Your mortgage professional can review your situation and give you the best recommendation for your situation.

Strategies For A Down Payment - If you are unable to go with 100% financing for your new property purchase, here are a few ideas you might look into to come up with a down payment.

Many cities and government agencies have downpayment assistance programs available to new homebuyers. Contact your local agencies and inquire about grants and other programs that may be available in your area.

If you are buying your first home as a married couple you can "register" for down payment help as one of your wedding presents. People can donate to a savings account in your name, then you use the money towards your down payment. Make sure you keep a register of who donated, how much, and their relationship to you. The register may not be necessary, however some lenders will want to make sure that anyone who contributed does not have any direct interest in the sale of the home you eventually buy

Another common strategy for coming up with a down payment for a home is to use your tax return money that you get back for your down payment money. Some people will save this up for a couple of years, some will combine this money with other savings or you may be able to combine this with gift funds from a relative. There are many creative ways to come up with money for a down payment. Ask your mortgage consultant for ideas.

For first time buyers, it is important to meet with a mortgage professional in order to plan your home purchase. You may be able to borrow from a 401k or other retirement account. If you are a veteran, you may qualify for VA financing for 100% of the purchase price of a home. You may want to speak with close relatives about the possibility of gift funds for a down payment. Again, your mortgage professional can work with you to personalize a down payment plan.

Employer retirement funds: If you have a retirement plan through your employer such as a 401k, you might want to consider borrowing from it. Most 401k plans allow you to borrower against them for home buying reasons.

One of the key benefits of FHA loan programs is that 100% of your downpayment can come from a gift. Gift funds must be deposited into your own account, and must be from a relative, qualified charitable organization, and sometimes even your labor union.

Got the Down Payment Blues - Got the Down Payment Blues

The Alt 97, Flex 97 and Flex 100 programs backed by Fannie Mae and Freddie Mac are becoming increasingly popular. These programs require 3% and 0% respectively down payment and as little as $500 toward the closing costs. There are also FHA insured loans that only require 3% and are very flexible about the source of your 3% down payment.

Even with a changing real estate market 80/20 loans are still available with many lenders. Some lenders have changed their credit score requirements on these types of loans lately, but they are still available. An 80/20 loan, also referred to as a combo loan can help consumers buy a home when they have little to no money available for a down payment on a home. 80/20 loans or combo loans also will help you to be able to avoid PMI, Private Mortgage Insurance. These types of loans have been very popular over the last few years and will most likely continue to be a very widely used option for consumers who do not have a down payment.

 

Information listed above is to be used for educational purposes only and is not guaranteed

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