Struggling With Your Down Payment? 3 Tips For Cash-Strapped Buyers

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Identifying Real Estate Risks After having a difficult time financially for quite some time, I realized that part of my problem was my personal housing costs. I really began evaluating what I wanted out of a home, and I realized that I needed to shop for a place that would work better for what I needed. I started paying more and more attention to real estate risks, and it occurred to me that I hadn't invested in a smart property. After talking with my real estate agent, I started focusing on changing my ways, and it was incredible to see how much brighter my future became.

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As a prospective homebuyer, you already know that making the largest down payment possible is the best way to create equity in your home, as well as lowering the cost of your monthly mortgage payment. Unfortunately, it isn't always possible to save up a large down payment before your family needs to move ahead with plans to purchase a home. If you are ready to purchase your first home but haven't yet been able to amass enough money to make a large down payment, here are three possible options for you to consider. 

Focus on low- or zero-down payment loan options

While not as prolifically available as they were during the years leading up to the subprime mortgage crisis a decade ago, some low- or zero-down loan options still exist. Buyers who have served in the military can apply for a VA home loan, which offers a zero-down option and the added savings of no prime mortgage interest (PMI) charge. The Navy Federal Credit Union is another option for those with a military background. 

Another zero-down option for a home loan is available through the USDA's Rural Development program. RD home loans are income-based and available only in certain eligible areas, and the homes purchased must meet guidelines for size, condition, and other criteria. 

The Federal Housing Authority (FHA) home loan is another option that requires only a small down payment of 3.5 percent. In addition to being a very low down payment option, FHA home loans are also available to borrowers with less than perfect credit. 

Consider using gift funds

Many types of home loans will allow borrowers to use gift funds that meet their guidelines. In most cases, the gift funds must be properly seasoned in the borrower's bank account and have documentation to show that they were obtained from an allowed source, such as a parent or other close relative. Gift funds must be a true gift, with no agreement for repayment, in order to be used in this manner when purchasing a home. 

Look for available assistance

To learn more about structuring your home purchase with little or nothing down, prospective buyers should take time to discuss their situation with their trusted real estate consultant. In addition to helping you find the best mortgage option, they can also direct you to any local down payment assistance programs, such as those that offer grants or special financing options that may be available in your immediate area. 

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