Article From HouseLogic.com: By: Erik Sherman: Published: October 26, 2015
One of the biggest misconceptions of home buying? The 20% down payment. Here’s how to buy with a lot less down. There are more ways than you think to save for a down payment!
Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.
Here are five creative ways to build your down-payment nest egg faster than you may have ever imagined.
Ways to Save for a Down Payment:
1. Crowdsource Your Dream Home
You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender.
Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.
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2. Ask the Seller to Help (Really!)
When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.”They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank.
Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs. There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance.
Individual banks have varying caps on concessions. No matter where they net out, concessions must be part of the purchase contract.
Related: 5 Questions To Ask When Buying A House
3. Look into Government Options
The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs.
Related: 6 Things Everyone Should Do When Moving Into a New House
These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state. HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for homeownership opportunities.
And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.
For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate. Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program.
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