Many young people today are in your same situation. In fact, a lack of savings is what stops most from purchasing their first home. In this section we will discuss several ideas for help with the down payment.
Many people today still think you need to save 20% of the home's value for the down payment, but that is just not the case. With an FHA loan backed by the Federal Housing Authority, you only need 3% of the home's value for the down payment, and you don't need any "reserves." A reserve is money left over after closing on the home. An FHA loan may also be a good option for you if you have dings on your credit score since they are a little more lenient. With a 5% down conventional loan, you may need a slightly higher credit score, but will also most likely get a lower interest rate. We will discuss more loan options in step 2.
For more information about loan types, click here.
For a limited time, a 3% grant is being offered by the Port Authority of Cincinnati
For more information click here: Communities First Program
For more information about VA loans, click here.
This means that a parent or close family member gave them money for their down payment. The gift amount that can be given tax-free is $14,000 per donor. So for example, you could get $14,000 from mom and then again from dad for a total of $28,000. This gift should be accompanied with proof of the transfer of funds and a gift letter. The letter itself can be fairly simple - in fact, your lender may give you a form to fill out. It should say something like this:
To Whom It May Concern:
We [donor's names] hereby certify that we have made [or will make, on a stated date] a gift of $[amount] to [names of recipients], our [child, sibling, grandchild, or other relationship between recipients and donors], to be applied toward the purchase of the property located at [address]. No repayment of this gift is expected or implied either in the form of cash or future services.
[Sign and date]
You'll need to give the original signed version to the lender.
Don’t invest in the wedding...invest in your home!
Did you know there are online registries that allow guests to make donations towards the down payment for a home? The gift home is one that will last for years and will be remembered for a lifetime. Instead of registering for a toaster or new sheets. Click here to get more information about the registries.
Getting a cosigner will help improve your chances of approval for a home loan. A cosigner may also help you negotiate better loan terms, such as a lower interest rate. However, because a cosigner is a co-borrower on the loan, the mortgage will appear on both of your credit reports. In the event that you default on the loan, the cosigner will be held liable for the outstanding balance.
There are all kinds of programs available to assist first time buyers with their down payment. Keep in mind many of these programs run out of money throughout the year so it is best to contact them quickly at the beginning of a new year. Here are a few programs worth checking out:
Keep looking if you don't find a program immediately. Your best bet is asking a nonprofit housing counselor locally. Their services are free or cheap. You can locate a counselor through one of the websites below, or contact the HomeOwnership Center of Greater Dayton at 937-853-1600 or toll free 866-956-9516.
If none of these options work for you, you may have to save the money the old fashioned way. Lucky for you, we have some tips to help you with your saving. Check out some of these great resources below:
*Source: 2013 National Association of REALTORS statistics.