Do You Need Help with a Down Payment?

One of the major obstacles to getting a mortgage and owning a home is the down payment. It wasn’t too long ago when home buyers could get great deals on their mortgage by putting either no money down or very little money down. But as we all know, the mortgage market has changed because of the problems that have occurred in the last couple years. The lenders don’t want to see a repeat of 2008 and, as a result, they are requiring home buyers to put 20 percent down when buying a home. How many people can actually put that much money down on a home? If you find this obstacle standing in the way of owning your own home, there is help available.

Federal Housing Administration (FHA)
The FHA is one of the most common ways to get a mortgage without a huge down payment upfront. The reason it is easier to get a mortgage loan through the FHA is because the loans given by this government department are insured in case the homeowner defaults on the loan. For this reason, it is easier for potential home buyers to qualify for a mortgage and they often only have to make a 3.5 percent down payment or even less depending on the price of the home. However, buyers must have a credit score of at least 580 in order to qualify for the 3.5 percent down payment. Another benefit of getting your mortgage loan through the FHA is that a friend, family member or charitable organization can pay your down payment, unlike other mortgages where the money must come from you.

Housing Agencies
There are several housing agencies, both on the federal level and on the state level, that will help financially with your down payment on a home. In North Carolina, there is a state agency that offers $8,000 in financial assistance for home buyers. The money is an interest-free second mortgage that is deferred and isn’t due until 30 year after the date of the original mortgage loan (unless, of course, the buyer sells their home in that time or refinances). Before signing up for state-sponsored financial help when it comes to a mortgage, know the specific eligibility requirements and the specifics of the loan so you aren’t surprised with repayment requirements that you were not aware of.

Save, Save, Save
One of the best ways to get a down payment for a home is to save up for it. Get serious about purchasing your first home and make changes to your lifestyle so you can put up money each week towards a down payment. It may take a couple years even to save for a down payment, but it will be worth it and you will feel an extreme sense of pride and ownership in knowing that you paid for the down payment rather than relying on an agency or some other help. An IRA is a great way to save up for a down payment because you can take out up to $10,000 from the account (without a penalty) if the money is going to be used for a first-time homebuyer expense.