Buying a house for the first time can be a confusing and complicated experience. Most first-time buyers find there is a lot more to the purchase than they expected. One of the biggest obstacles consumers face is the price.
The median U.S. home price in 2015 was $296,000, a figure that has progressively inched higher since 2009, when the median was $216,700, according to data from the Census Bureau. Most industry experts will advise homebuyers, if they can afford it, to make a 20% down payment. Doing so will likely help them secure a low interest rate on a residential mortgage while also avoiding the cost of private mortgage insurance.
Still, coming up with 20% of nearly $300,000 is a lot to ask - it rounds out to nearly $60,000. Most homebuyers source their down payments from their personal savings, according to the National Association of Realtors' Profile of Home Buyers and Sellers. But a 2015 GOBankingRates survey found that just 14% of people have more than $10,000 in their savings accounts. As such, it doesn't come as a surprise that the typical down payment is well below the 20% mark:
Fortunately, there are plenty of options for those homebuyers who are lacking in the savings department. More than 24,000 homebuyer programs are available to consumers, with down payment assistance programs being among the most popular, according to Down Payment Resource.
DPAs can be helpful resources to prospective homebuyers who don't have enough money in savings for a substantial down payment. But they also help communities, noted Leslie Darling, the executive director of the Chicago Infrastructure Trust, which debuted a new DPA in May, 2016.
"More than 24,000 homebuyer programs are available to consumers."
"We know where there is more home ownership in a community it makes for a greater community and a safer community," she explained to a group of real estate agents, according to DNAinfo.
DPAs are often offered through state, county and city governments, wrote Danny Gardner, Freddie Mac's vice president of Single-Family Affordable Lending and Access to Credit. Your mortgage lender may have one available to you, or know about programs in your community.
Eligibility requirements vary between programs, and might include:
If you qualify, you could receive a couple thousand dollars or more toward your down payment or closing costs.
Gardner noted that some programs require borrowers to attend homebuyer education counseling.
Since DPAs are usually available through a government source, funds are often limited. Most programs are issued on a first-come, first-served basis.
While DPAs are commonly regarded as programs for first-time homebuyers, don't worry if you've already owned a home. DPR explained that the U.S. Department of Housing and Urban Development considers anyone who hasn't owned a home for three or more years a first-timer. Plus, there are plenty of programs that don't have a first-time buyer requirement.
Repayment requirements also vary. Some programs want all money repaid, while others don't ask for any payments, according to The Mortgage Reports.
At a time when home prices are continuing their rise, an inventory shortage is inspiring bidding wars in many areas, and monetary policy changes are pushing mortgage rates higher, DPAs could become a key aspect of the homebuying process. Making sure you know all options available to you is crucial in making an informed purchasing decision.
Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2015 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.