Down Payments Made Easy
The temperature is heating up, which means that the red hot real estate market will get even hotter. Real estate experts are expecting this to be particularly true in the Boston market. Traditionally, the warmer months are when the most real estate transactions occur. Sellers are more willing to entertain open houses in warm months and buyers are more willing to visit properties. With mortgage rates still at discount levels, right now is the perfect time to buy the home of your dreams. Many people have thought about buying a home, but have not taken the leap because they fear the dreaded down payment. However, you are probably much closer to having a down payment on your dream home than you realize. The team at Streamline Realty is here to explain why fears over a down payment should not deter you from trying to buy a new home.
You Don’t Need a Large Down Payment to Buy a House
Many people self-select themselves out of buying a home because they don’t think they have enough for a down payment. When potential home buyers think of down payments, many think you need tens of thousands of dollars just sitting in your bank account. However, there are many different mortgage types that require far less of a down payment than you would expect. For instance, if you served in the military and meet certain requirements, then you might qualify for a VA loan. These government backed loans require no down payment for anyone who is approved.
First time home buyers also have plenty of options that provide small down payment options for mortgages. If you are a first time home buyer, you might qualify for FHA loans. Aside from small down payments, FHA loans are also great for people with less than perfect credit scores. If you have a credit score between 500 and 579, then you might qualify for a FHA loan with as little as a 10% down payment. If your credit score is 580 or above, then you might be able to qualify for a loan with as little as a 3.5% down payment.
For individuals who are looking to buy a home in a rural area, then you have another mortgage option with little to no down payments. USDA loans have certain eligibility requirements, however, if you meet them, they do not require any down payment. Many home buyers are taking advantage of remote work and are moving to rural areas. USDA loans are an excellent program to take advantage of if you are considering giving up city-living.
All of these programs that were just discussed are special programs provided by the federal government. However, many lenders offer mortgages with much smaller payments than the traditional 20% that scares off many home buyers. Every lender has their own loan offerings and their own standards for qualification. That is why it is always advisable to talk with a professional, independent mortgage broker who can talk you through your options. You might just be surprised at what is available to you.
Quick Ways to Save for a Down Payment
Right now is the perfect time of the year to think about saving for a down payment. There are two things happening that might give you a quick head start for getting the funds you need to buy the house of your dreams.
The calendar has just turned to March, which means that we are about to get into the thick of tax season. Tax season is a double-edged sword. On one hand, it can be a hassle getting all of your documents together to file your 2020 taxes. However, many people will be getting tax refunds. Tax refunds are an excellent way to jump start your savings for a down payment. If you are able to qualify for one of the low down payment options, tax refunds can provide a significant chunk of what you need.
Another great opportunity for you to get your down payment together is the federal government’s next round of COVID relief. The Senate is currently debating the American Relief Act, which contains another round of stimulus checks. While the terms of these checks are still to be worked out, passage of this legislation is expected in the near future. For those who end up qualifying for these stimulus checks, you might be getting a check for several thousand dollars. Again, this can be a large portion of a down payment for buying a new house.
A quick hypothetical example can show you the power these two financial boosts can give you toward a down payment. If you are a first time home buyer who qualifies for a FHA loan at 3.5% and you want a $300,000 house, you would need a $10,500 down payment. Tax refunds and stimulus checks can get you very close to the down payment you would need.
Final Thoughts
Do not let a down payment scare you away from trying to buy the home of your dreams. One of the strengths of working with professional realtors like us at Streamline Realty is our powerful network. We have access to some of the premier independent mortgage brokers available. They can work with you to let you know exactly what type of down payment you would need based on your specific financial situation. The bottom line is that you should not disqualify yourself from buying a new home before you even try. The fact is that you just might be closer to having your dream home than you even realize.
