Saving up for a downpayment is the #1 biggest hurdle for many people looking to purchase a home. Especially those looking to make the jump from renting to owning.
Here are some tips to consider when working toward the downpayment on a home:
1. Start SOON!
Start saving now. The best thing you can do is calculate what your extra monthly costs would be as a homeowner and then set aside that amount, minus rent and utilities.
This accomplishes two goals:
1. Saving money for a downpayment
2. Getting you accustomed to what financials will be like when owning your own home
2. Weigh loan options
The type of home loan you get will determine the downpayment needed. Normally buyers would plan to save for atleast 20% down in order to lower their monthly mortage payment and allow them to avoid paying private mortgage insurance. BUT, there are loans out there that require as little as 3% up front or even 1% out of your own pocket (contact me for further details).
Buyers that are U.S. military veterans, service members or residents of specific rural areas may not even have to save for a downpayment.
3. Explore other options
Saving for your downpayment may sometimes take a little more than just cutting back on dining out or traveling. You can look in to your downpayment being GIFTED by a friend or relative (contact me for the rules and guidelines). Also, borrowers with low or moderate income, teachers, firefighters, or other public service job holders may qualify for downpayment assistance through thousands of federal, state, and local programs aimed to help homebuyers.
There are more than 2,100 funded programs, many of which help cover the downpayment and closing costs through loans that can sometimes be forgiven over time, or paid back only once the buyer sells the home.
4. Consider using home equity
This is a newer approach to coming up with a downpayment which involves letting investors put up some of the money in exchange for a slice of the potential value in the home.
San Francisco-based Unison now has a program available in 12 states and the District of Columbia that offers to match up to half of a 20 percent downpayment on a home. This match isn’t a loan, which means you do not have to make payments.
There are several payback scenarios, but essentially the company collects a 35% share of the gain, if any, when you sell the home. If the home declines in value then the company also shares the loss.
If after 30 years, you still own the home, an appraisal is done to determine how much Unison is to be paid. The homeowner can also buy out Unison any time after their third year in the home.
There are options to help you become a homeowner. Being in the KNOW is the best place to be. Don’t be afraid to ask questions and explore options. I am happy to assist you!