Need help buying a home? You’re not alone. Many people dream of owning their own home. But after researching the amount of cash needed to buy a home, some hang up this dream.
While it’s true that buying a home often requires cash for a down payment and closing costs, it is possible to buy with limited funds. A common myth is that you need 20% down to buy a home. Yes, this is an ideal amount, but by no means a requirement.
Down payment guidelines are more relaxed today, and the truth is, a variety of programs can open the door to affordable homeownership.
1. Low to No Down Payment Mortgages
If you’re thinking about buying a home, but don’t think you’ll qualify due to limited resources, you’ll be happy to know that many programs allow purchases with as little as 3% to 5% down.
You can get an FHA home loan with as little as 3.5%, and you can qualify for conventional home loans with only 3% to 5% down. Also, if you’re active duty, a veteran or the eligible spouse of a qualifying veteran, you can purchase a home using a zero-money-down VA home loan.
Are you thinking about buying a property in a rural area? If so, a zero-down USDA home loan might be an option. And the good thing about USDA loans is that you don’t have to live in the middle of nowhere! Many small suburbs and towns on the outskirts of metropolitan cities qualify as rural and may be eligible for these loans.
2. State Homebuyer Assistance Programs
In addition to a low-down-payment mortgage, you may be eligible for a homebuyer’s assistance program offered by your state. These programs are designed to make homeownership more affordable and accessible to borrowers. If eligible, you can receive help with your down payment and/or closing costs.
The type of help varies by location. Some eligible homebuyers receive a second mortgage to cover their down payment or a no-interest loan, whereas others might receive a home buying grant. To learn about state home buying assistance programs in your area, visit the online website for the U.S. Department of Housing and Urban Development (HUD).
3. Mortgage Tax Credit
Another option is to see whether you’re eligible for the Mortgage Tax Credit Certificate (MCC) program. This tax credit is available to low-to-moderate income buyers for as long as they live in the residence.
This is not a tax deduction, though, but rather a dollar-for-dollar tax credit to reduce how much you owe the federal and state governments. And as a result, you’ll have more available income to qualify for a mortgage. This tax credit is up to 50% of the mortgage interest paid, up to $2,000 a year.
4. Lender-Specific Down Payment Assistance Programs
Along with mortgage programs, statewide homebuyer assistance programs and tax credits, some individual mortgage lenders have their own down payment assistance program.
Program requirements do vary depending on the mortgage company. For example, some programs are specific to first-time home buyers. Others may only provide assistance to those with low-to-moderate incomes. In either case, these programs provide eligible borrowers with down payment and/or closing cost assistance, up to a certain percentage, which puts homeownership within their reach.
Low down payments and down payment assistance programs can help to make homeownership a reality. If you’re worried that you can’t afford a down payment, speak with a loan expert at FirstBank Mortgage. Give us a call or fill out the contact form to learn about eligibility.
Disclosure: Application is required and is subject to underwriting. Not all applicants are approved. Full documentation & property insurance required. Loan secured by a lien against your property. Fees & charges apply and may vary by product and state. Terms, conditions & restrictions apply, so call for details. FirstBank Mortgage provides a variety of loan products with different rates, payments and fees. All loans are subject to credit approval. Products and services offered by FirstBank. FirstBank Mortgage is a division of FirstBank.