Purchasing a Home
Purchasing a home is a big step towards one of the biggest investments and purchases you can make. Home buyers who have not owned a home in their name in 3 years are considered first time home buyers when looking to secure a home loan. A down payment is needed in most cases when purchasing a home. The big question is always, “how much home can I purchase and how much do I need to put down when buying the home”.
There are several types of home loan programs and each program varies a little regarding what is required for a down payment and the credit score needed to qualify.
A good rule of thumb is to start with 20% as a down payment and a credit score of 620. When you meet these traditional requirements you may not even be aware of Down Payment Assistance programs because your Realtor or Lender may not even think of mentioning DPA’s as an option.
Seventy percent of millennials are struggling to save up 20% to put down on a home purchase and are currently spending 30% of their income on rent.
Down Payment Assistance programs can be used by first time home buyers with less than 20% available for a down payment and credit scores that may not quite reach 620.
I am going to tell you why any first time home buyer should consider DPA programs!
When purchasing a home it is important to know your options. And how to best meet your purchasing needs and future budget.
An example when trying to save up $20,000 for a down payment by putting away $200 a month aside will take a little over 8 years to achieve. We all know life happens and when things get tough or you experience a job change and unexpected life expenses that $200 put aside could end up going towards something else.
Picking a Home
What if you do not want to wait 8 years or you might ask, “why would I want to use a Down Payment Assistance program when I already have some funds saved up for a down payment?”
State and local down payment assistance programs are available to help you with your down payment. Government programs are offered through specific counties and cities will offer grant funds to be used towards home purchase and applied to the down payment and or closing cost.
Picking a home will require you to pick a program. If you know the city or county you are interested in residing in, as your Home Loan Consultant, I will research which programs are available in those areas. These programs are tailored to meet the medium housing cost and income levels for the servicing locations. This means you must be within or below the medium income level to utilize the program in that city.
These programs are very realistic when looking at income ranges and the cost of homes in their territories and you can rest assured that you will be able to find a home you are proud of taking ownership in.
Traditional down payment requirements
Let’s take a look at the difference between using and not using a down payment assistance program.
Education courses are required when utilizing a Down Payment Assistance program. Classes typically run 4- 8 hours long and can be taken in a classroom setting or online. There may be a charge associated with the class and once the class is completed a letter of completion is awarded to the homebuyer and will need to be given to the lender.
Conventional Loans traditionally like to see a down payment of 20% of purchase and a credit score of 640; however, as little as 3% down payment can take place requiring the buyer to have mortgage insurance. The Math: Home purchase of $380,000 w/20% down equals $76,000 all coming out of the buyers pocket.
*Fannie Mae will grant 3% with a minimum credit score of 620. The Math: Home purchase of $380,000 w/3% down equals $11,400 granted.
FHA Loans require a minimum down payment of 3.5% with a credit score of 580 a lower score will require 10% .
Down Payment Assistance added to the mix
*Chenoa offers help with a downpayment and closing cost offered as a 10 year second mortgage and a 640 minimum credit score and works with the Home ready program.
*metroDPA Colorado Program credit score 660 for Conventional Loan and offers up to 6% down payment assistance. metroDPA works with Freddie Mac HFA Advantage and covers the following counties: Adams County, Arapahoe County, Boulder County, Broomfield County, Denver County, Douglas County, Jefferson County, Larimer County. The Math: Home purchase of $380,000 w/6% down equals $22,800 granted.
*CHFA mid credit score of 620 and income max limit applies. Grant up to 3% on the first mortgage and up to 4% on the second mortgage. Grant up to 3% on the first mortgage and up to 4% on the second mortgage.
The Savings
The difference you may have saved up compared to what you may qualify for when using a Down Assistance Payment Program could be used towards some needed upgrades for your new home, home furnishings, and other costs that come with moving like the cost of moving trucks, boxes, and disposing of unwanted old belongings.
The cost of moving and transforming your living space can become costly especially when needing to buy furniture, window coverings, shelving, area rugs, bedroom and bathroom items. With the help of a down payment assistance program you now can make your budget work for you.
You have the Keys
Homeownership is a great achievement no matter what stage of your life you are in. With the high cost of living and the increasing cost of home purchases, applying for a down payment assistance program may save you money.
When submitting your pre approval application be sure to let me know you would like information about the down payment assistance programs available in your area.
What are you waiting for!?
The time to purchase is now, with our free mobile app you can complete your application in under 10 minutes. As your Home Loan Consultant I will help you find the best rate, product, down payment assistance program, and meet your monthly budget goals.
Author:
An Equal Housing Lender