Back now with our special “Show Me the Money!” An in-depth look owning a home of your own – and, how to pay for it!
And we’re going to wrap up today’s show with a quick recap of what you’ll need to buy a home….and how to get it. OK?
Now let’s start low, and build up.
First, if you qualify for a VA loan – they allow a zero down payment. If you are a veteran or an active duty service member, you need to know that.
And if you are buying a home in a rural area, ask your REALTOR® about the Department of Agriculture’s loan program. I know – the Department of Agriculture? Really
Yep. The USDA has a zero-down home loan program for people buying out in the country.
If neither of those programs work for you, then you will have to come up with some cash when you buy a house. But – you do not need a 20% down payment. You just don’t. If you are a qualified buyer, you can find a good, safe mortgage with as little as three percent down! And again, this is not some sub-prime, risky, back alley mortgage – this is a high-quality home loan. So that’s a starting point.
So how do you get the money? Well, of course, people who selling one house and buying another just take use the profit from the first house to buy the second one.
But if you are a first time homebuyer you don’t have that ability. So for you, there are basically four ways to get your down payment ready to go.
First – save it! Just sock away all the money you can, and try to temporarily stop spending on things you don’t really need. Plenty of people have given up vacations, or restaurants, in order to save up that down payment money. You can too.
It helps, by the way, to have your money put into your savings account automatically….you never see it? You won’t be apt to dip into it.
Second – plenty of first time buyers get the down payment from their parents. But it has to be a gift – not a loan. Lenders won’t allow you to borrow the down payment, and also get a mortgage. Your parents will have to give you the money – and you know what? It happens all the time, all across the country.
Third – if you have an IRA or a 401K, you might be able to either withdraw money for a down payment. BUt talk to your accountant about this one….you need to try, at least, to avoid penalties for early withdrawal. So talk to a financial pro about whether it’s a smart move, or not.
And the fourth way to come up with a down payment? Your city, or state might have a program that provides down payment assistance. Again talk to your REALTOR® about what programs serve your area….you might qualify, you might not. But many people are surprised, that they can be making a pretty good amount of money – and still, get Down payment assistance.
Now let’s leave you with one last thought. We’ve talked a lot today about how to get into a house, and your financing options. But – if you can, you should know it’s almost always better to put down a bigger down payment. As much as you can! Your monthly payments will be lower, you’ll walk into the place with more equity, and if prices were to drop? You’d have more protection, against going underwater. So more is better.
But if you just don’t have more, that’s OK. Just remember, you do not need 20%. If all you have is three, three and a half, or five….percent, don’t give up. Because the home you want – could be within your reach.