One of the biggest hurdles in buying a home is coming up with a down payment—the large chunk of cash that’s typically required to secure a mortgage for a house.
Fortunately, most lenders today offer a wide range of down payment options for 5%, 10%, 15%, or 20% of the price of the house. For many first-time homebuyers, a government FHA loan can be obtained, for as little as 3.5% down. If you are a military member or veteran, there are even more budget-friendly options available to you.
Many home buyers tap their savings to procure the funds for a down payment, and often postpone large outlays to save money. But here are some other ways to come up with a chunk of money.
1. Gifts from family or friends
Some types of loans allow “gift” funds—money that is given to you—for a down payment. The person who gives the money must have no financial interest in the property and the funds must be a true gift, backed up by a letter. Banks won’t allow “gift” funds if the gift is a loan that has to be repaid.
2. Down payment assistance
Many local and state government programs offer down payment assistance for borrowers in need, so check with your lender or state housing commission for more information.
3. No-PMI home loans
There are a few loan options that allow you to put down less than 20% without the added PMI cost. Check with your lender to see if it offers a low-down-payment, no-PMI product if a 20% down payment seems too challenging
4. Make saving a habit
The surefire way to make your down payment is to start a fund for it now.
Contact me today if you need assistance with your home-buying process.