4 Strategies to Conquer the Down Payment for First-Time Homebuyers
That moment when you decide that you’d like to get a place of your own may hit like an epiphany—the kind that comes when you least expect it. Many of us have experienced that thrilling realization, “I need to get my own place.” That’s the fun part. The latter half to that is the perplexing question of: “But . . . how?”
If you have ever wondered what the big secrets are about the down payment, you’re not alone. When it comes to buying your first house, it’s by far the largest hurdle as well as the scariest. Talk around the La Croix machine at the office or the Cornhole court with friends may have given rise to some standard myths about how much money is needed to get the ball rolling toward homeownership.
But where your friends might have steered you toward specific numbers, they may have forgotten to mention the various ways you can still manage to snag a house without a full 20% down. Friends are great for many things—sounding boards, moral support, laughs, and lawn games. They may not be experts on mortgages, however. Did we mention that mortgages are our specialty?
That’s right! You’ve come to the right place. Shall we?
Low Down Payment Mortgages
VA loans, FHA loans, USDA loans, and some conventional loans can reduce your down payment—if you qualify—to anywhere between 0% to 3.5% versus the oft-referenced 20%. That exact percentage will depend on which loan you can get or, in some cases, your credit. You can read up on these types of loans or you can talk to a mortgage professional to learn if they’re a possibility for you.
Down Payment Gifts or Tax Refunds
Looking for something to spend all those college graduation gift dollars on? Did money fall out of the ether when some distant relative passed on? Not to be too insensitive (hence the distant relative), but a down payment may be a great investment for either or both of those sums.
Another common sudden influx of cash that can be easily channeled toward a first home purchase without drawing penalties is your tax refund. Consider saving it for your down payment!
But no matter where you find funds like these—a gift from a relative, cash presents for reaching a life milestone or the like—you’ll have to disclose where you got the money. So be prepared for that when you start gathering your forces to conquer the down payment.
Crowdfunding a Down Payment
What? Yes! Welcome to the era of the crowdfund. If we thought we’d seen the end of this with Indiegogo or Kickstarter, we were wrong. These days the crowdfunding fun has extended into the market space of homebuying and home DIY projects.
Feather The Nest is an option that’s similar to a gift registry and strongly targets newlyweds or engaged couples. The drawback with this site is those—ouch—7.9% transaction and credit card processing fees, plus 30 cents on each donation. Those numbers can add up fast!
But, if you’re up for a fun new way to rustle up the cash for a down payment, times have never been better for something like a down payment crowdfunding gig.
Many states offer programs that are designed to help locals get into property. While similar to the federal programs for homebuyers, there are more programs than we can name here, and many of them are unique to each state. When you decide to sit down with a mortgage professional, they should have insights into what your state can do to help you with a down payment.
Not every mortgage lender offers the same products, either, so it may be worth it to shop around to find out who can give you something that best matches your needs.
Believe it or not, there are more ways than the above to win at the down payment, but our hope is that we’ve illustrated a crucial point—it isn’t just the method you employ to get yourself a down payment, it’s the mentality. Where there’s a will, there’s a way.
And of course, mortgage professionals like ourselves are only a phone call away if any of these options sound like something you’d
like to explore. Give us a call!