Many times the down payment to buy a home is the one obstacle that stands in the way of homeownership for would-be buyers. What many people do not know is that there are a number of programs that can help buyers come up with the money that they will need to buy a home.
For those buyers who have a clean credit record, there is a no down payment loan program available. A Guaranteed Rural Housing Loan offers a no down payment loan with additional assistance provided with the closing costs if you purchase a home in an approved area and meet the income restrictions.
If you have some minor flaws on your credit rating, you could look into an FHA loan. FHA loans can have down payments as low as 3.5% on a home purchase and the down payment money does not all have to come from you. The funds to be used for your down payment can be yours, or they can come from a gift from a family member, or a combination of the two. If you are using gift funds toward your down payment, make sure that you consult your mortgage professional to be sure that the proper gift procedures are followed to document the transfer of funds.
FHA loans can also work in conjunction with some nonprofit down payment assistance programs approved by HUD. These programs provide down payment assistance in the form of a second lien on the property. Nonprofit and Nonprofit Instrumentality of Government down payment assistance programs must be approved by HUD and on the approved roster. Government Entity down payment assistance programs also offer help in the form of a second lien on the home, however they do not require HUD approval. The secondary loan works in conjunction with the FHA loan. Your lender must be sure that all of the FHA requirements are met.
Military veterans and active duty members can apply for VA loans. These loans require no down payment and can apply fees to the total loan amount, significantly reducing the upfront cash requirement for buyers. In addition to the federal programs mentioned, there are a variety of first time homebuyer grants that may be available in your state. Check with your lender on what programs might be available to you where you live.
There is too much help out there to let finding down payment assistance stand in the way of you owning a home. Find the program that works the best for you and take advantage of the affordability and low interest rates that are available right now.
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About David Goldstein — David Goldstein is an Owner and Founding Partner of Colibri Real Estate, LLC. which operates online education providers Colibri Real Estate, Insurance License Express and License Tutor. Follow him on Twitter.
