Jan
1
Sources for Down Payment funds
Filed Under mortgage | Leave a Comment
Editors Note: Due to the mortgage and credit crunch, many down payment programs are no longer be available. If you’re in need of a Denver mortgage contact us to discuss your mortgage options.
There are many acceptable ways to obtain some additional funds for a down payment and closing costs. First time home buyers and investors are more recently applying for 100% financing. If you have funds for a down payment and/or closing costs, this can help to reduce your interest rate.
A Secured Line of Credit such as a Home Equity Line of Credit (HELOC) can be used as a source of funds.
If down payment money is hard to raise for you and your family, talk to us about 100% financing and seller’s concessions.
If you are relocating at the request of your employer, find out if your company offers programs to assist in paying for part of the down payment and closing costs. Many large corporations have such programs as employee benefits. Even if you work for a small company that does not have such programs in place, you may still be able to negotiate for some relocation assistance.
The Genesis and Enterprise are two other programs that will help with down payment assistance. Some of the down payment programs are set up where they put a lien on your property for a certain period of time such as 5 years. As long as you own the property for this amount of time the lien will be released.
Each type of mortgage and lender has different guidelines for what are allowable sources for down payments. Consult with your mortgage broker as to what is the best place to start and how to track the funds for approval.
There are also programs available through non-profit and/or your local, state or federal government called Down Payment Assistance (DPA) programs.
Honesty is the best policy when getting a mortgage. Watch out for anyone who asks you to withhold information from the lender. Some home buyers might be tempted, for example, to fudge the facts about the source of their down-payment money. A lender will assume that the down payment comes from savings. If the money comes as a gift or a grant, that fact has to be disclosed — even if it means the borrower has to pay a higher interest rate or shell out for mortgage insurance.
Family is a great place to start. Talk to your immediate family, parents, brothers, sisters, grandparents, etc. they may be able to help you out with a Gift of funds. This Gift is not a loan, and they will often have to fill out a Gift Letter stating where the funds are coming from and how they are related to you. In some cases a bank statement from them may be required to source the funds.
Many states and cities have bond programs that provide down payments for homebuyers.
A good source for a down payment is money that people with 401k’s have already saved. Using money in a 401k for a down payment on a home, if done wisely can be just a good of an investment in their future. Real Estate normally is a low risk investment when compared to other types of investments. Homes usually appreciate over time under normal conditions. This appreciation over time can often outpace the gains made in a retirement account.
Another source for down payment assistance are grant assistance programs such as the Nehemiah program that you do not have to pay back! You can get as much as 6% down of the final contract sale towards down payment or closing costs.
Jan
1
Down Payment Sources?
Filed Under mortgage | Leave a Comment
Editors Note: Due to the mortgage and credit crunch, down payment requirements have increased. If you’re in need of a Denver Home Loan contact us to discuss your mortgage options.
Many buyers look at their cash on hand as their only source for their down payment. This simply is not the case. One way to fund or partially fund a down payment is by using a gift. Parents, grandparents and other family members are often eager to help by making a cash gift toward the purchase of your home. There are also down payment assistance charities that can help you. And, of course, if you are selling a home, the equity you’ve built up can be applied to your down payment.
Another good source for a down payment is to borrow against your employer’s retirement plan.
Many states and counties offer down payment assistant programs for homebuyers. Government down payment assistant programs often have some restrictions, such as the homebuyer must not own any other properties, and the property being purchased has to be the home buyer’s primary residence, etc. Many programs also stipulates that if the homeowner sells the property at a profit or refinances the mortgage to withdraw cash within a certain number of years, the homeowner must repay all or a portion of the funds he received as down payment assistance.
Lots of Gift programs out there. Nehemiah(sp), heart program etc. Just make sure that if it is not an FHA loan that the HUD does not disclose where it is coming from. I had this conversation with Argent and a few other lenders recently and they just do not want to see it on the HUDS that it came from one of these places. Otherwise you are fine. All they want to see is certified funds. FHA, on the other hand, doesn’t care. These programs were designed around FHA and FHA loves them so you can do a 100% FHA loan instead of a 97%.
Often the lender will require the Gift fund to be seasoned or have been in the bank for a certain amount of time.
For those with good credit scores there are 103% programs available. There is no down payment and the 3% is used to cover closing cost. As you can see there are many sources for down payments that you may not be aware of. If you want to buy a home and do not have down payment money available go ahead and contact your mortgage broker and he/she can help you decide what might be best for you.
For borrowers with good credit who can qualify for 100% financing, it may be worth considering speaking to the seller about a seller’s concession to help with up front cash requirements.
Some companies have down payment assistance programs for employees who are relocating at the request of the employer. Others offer low interest rate loans to employees to be used as part of a down payment. Even at companies that have no such programs in place, some may be willing to offer some form of assistance.