These are the big hurdles you have to deal with after you apply
for a loan.
It's a Big Deal. A down payment
plays a major role in qualifying for your loan. The amount you put down affects
how much you can borrow and determines your monthly mortgage
payments. From a lender's perspective, the more money you put down the better
because it reduces their risk of foreclosure.
From your perspective, a 20% down
payment means you'll borrow less, pay less interest
over the life of the loan and get a lower monthly payment. Unfortunately,
nothing puts a bigger dent in your home-buying budget
than the down payment. Few first-time homebuyers can fork over that much cash.
There is hope. Ask your lender about Fannie
Mae, the major secondary mortgage company. Fannie Mae makes loans available through local lenders requiring as little
as 3 percent down. The Fannie Community Home Buyer's Program offers various plans
that allow family members to gift or loan the funds for the down payment. Another mortgage lets you put 5% down and pay interest only for the first year, which means you get to deduct the entire monthly payment
from your taxes.
FHA-insured loans require a maximum of 3% down, if you meet the program's guidelines.
Zero down-payment loans are available from the VA for veterans and active military
Remember that everything
in the sales contract
is negotiable. You can ask the seller to cover points
and closing costs, leaving you more cash to cover the down payment. Most mortgage lenders let sellers pay discount points,
loan origination fees, and settlement
costs up to at least 3 percent of the home's value.
you have assets
you can borrow against, you can use a loan to meet your cash requirements. However,
remember that the loan must be secured and that the repayment amount will be counted
in your debt
ratio, which will affect the amount you'll qualify for on your home loan.
The National Association of Housing Partnerships (NAHP),
a nonprofit organization, offers a no-down payment loan where you pay only half a percentage of the loan value at closing.
The Nehemiah Progressive Housing Development Corp. makes a gift of the down payment if you come up with 1% of the purchase price for certain items such
as the appraisal fee, credit
report and hazard insurance. The Nehemiah loan is only available as a Federal
Housing Administration (FHA) loan (but it receives no government subsidies).
Check with FHA or local lenders for income guidelines on these programs.
Surprisingly, some companies offer payment of closing costs as
an employee benefit. It can't hurt to ask.
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