6 Ways to Come up With a Down Payment
The down payment for your next home may be more attainable than you thought. Don’t let the myths mislead you. Thankfully, there are more than a few ways to keep your down payment affordable.
1. Down Payment Assistance
Did you know that thousands of DPA programs exist, created for the sole purpose of making it easier to buy a house? Down Payment Assistance is typically offered locally and may come in the form of a loan or grant that doesn’t have to be paid back. If you qualify for a grant, that money may be able to go toward closing costs too.
✅ Once you pre-qualify*, one of our Loan Officers can give you insight into which local programs may be available. Note that Veterans and active duty service members may be eligible for specialty DPA programs in some states.
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Did you know that thousands of DPA programs exist, created for the sole purpose of making it easier to buy a house?
2. Low/No Down Payment Loans
VA, FHA, and USDA loans, as well as some conventional loans, can lower your down payment—for those who qualify—to anywhere between 0 to 3.5 percent. This is far below the oft-referenced 20 percent. The exact percentage will depend on the loan you qualify for and, in some cases, your credit.
✅ Here at DG Pinnacle we will provide you with different loan programs that require no down payment or down payments as low as 3.5 percent. All of these loan products also allow gift funds.
3. Gift Funds
Whether it’s college graduation gift money or funds from the passing of a distant relative, that cash can be invested in a down payment. Loved ones who want to help you save up for a house can also gift up to $16,000 without taking a tax hit. Gifted money requires a gift letter from the giver, needed to disclose where the funds came from to your Loan Officer.
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VA, FHA, and USDA loans, as well as some conventional loans, can lower your down payment—for those who qualify—to anywhere between 0 to 3.5 percent.
4. Tax Refund
Another common influx of cash that can be easily channeled toward a home purchase without drawing penalties is your tax refund. Consider putting it down on a house. The average tax refund is currently $3,039. Depending on the loan program you choose, this could cover a significant portion of your down payment.
Crowdfunding isn’t just for a start-up or small business. It can be used to help you save up for a new house too. There are options similar to a gift registry and strongly targeted toward engaged couples and newlyweds. While there might be a small percent transaction fee per gift, some people have reported being able to crowdfund almost all of their down payment.
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The average tax refund is currently $3,039. Depending on the loan program you choose, this could cover a significant portion of your down payment.
6. Work on Your Credit
If you’re using a conventional loan—versus a low or no down payment government-insured loan—you’ll be required to pay private mortgage insurance (PMI) when putting less than 20-percent down. This insurance can be added to your closing costs or to your monthly payment, which is more common. The cost of PMI does depend on credit health; it can significantly increase with average or below-average credit scores in the 600s.
✅ Meet with one of our Loan Officers to figure out if there are a few simple ways to strengthen your credit before you purchase. Doing this can tell you exactly how much your score needs to increase, if at all, to make you eligible for a more competitive monthly PMI premium. Added bonus: Improving your credit score may also help lower your mortgage rate and monthly payment.
Just as your mortgage needs to be customized to your unique needs, so does your down payment. Reach out to one of Loan Officers for a personalized assessment: We can help you decide on a down payment amount you feel good about.
*Pre-qualification is not a commitment to lend. This blog is intended for educational purposes only. Please consult a trusted professional as personal circumstances may vary. Please consult a tax professional about your specific situation and the tax savings benefits of homeownership.
This article was originally published by Bethany Ramos in www.academymortgage.com