The time has come…you’re ready to do some adulting and buy a home, settle down, spend Saturdays at Home Depot, maybe even lay down some tile somewhere. But there’s just one problem, you’ve got to save a huge pile of cash for the down payment because, after all you are a first-time homebuyer in California.
Can you relate? I can, and this is the story I hear from many clients day-after-day.
Well, I’ve got some good news for you. You have options – down payment options – that can make it easier for you to get into your first home sooner. And below, I’ve got all the best options laid out for you so that you know what’s available. So many people I talk to do not know about these options and just assume they need to have 20 percent down. But that’s not necessarily true. Of course, there are qualification guidelines so if any of these programs interest you, let me know and we can explore your specific situation.
Home Possible & HomeReady – 3.0 to 5.0 percent down
Home Possible and HomeReady are offered by Freddie Mac and Fannie Mae and are conventional mortgages that allow for low down payments of 3.0 to 5.0 percent. Plus, the mortgage insurance rates are low, or you can choose a slightly higher rate and the lender will pay your mortgage insurance. These are great programs and my top pick for low down payment options and here’s why:
One of my clients is buying her first home. It’s your typical $500,000 starter home – yikes, these prices! – and she’s qualified for the Home Possible mortgage program. She will only need to put 5 percent down and when we did all the numbers we discovered that her mortgage payment, including taxes, insurance – and her mortgage insurance premium! – will only be $100 more per month than what she’s paying in RENT. She’s thrilled and so excited!
Another tip with these programs is that you can receive gifts from parents or others that can be used toward the down payment. I have another client buying their first home with 5 percent down and their parents are gifting that amount to help them buy their new home.
FHA low down payment program – 3.5 percent down
If you have a higher debt to income ratio, you may be able to consider an FHA (Federal Housing Administration) mortgage that only requires 3.5 percent down payment. These mortgages are a great option; however the mortgage insurance cost is higher than the conventional programs above.
For our Veterans
The Veterans Administration or VA mortgage for those formerly or currently serving in the armed forces requires zero down payment and no traditional mortgage insurance is required. Also, if sellers choose, they can pay all the closing costs.
What about other options?
Not to worry if these programs may not apply to you, say, if you are self-employed and show little income but have assets. Bank statement loans may be an option for borrowers like you.
What about the down payment assistance programs?
As you begin your journey to home ownership and finding the right mortgage for your situation, you may hear about many different down payment assistance programs. There are numerous options that you’re likely to run into along the way. They may sound great, but I warn my clients to know the facts about them before agreeing to their terms. Some have terms that are not in your best interest, like creating a second mortgage on your home. If you ever have questions, please let me know, I’m happy to walk you through their terms and help you decide if they’re the best option.
So, see, the path to buying your first home may not be as long as you thought. I absolutely love helping first-time home buyers navigate the whole home buying and financing process. My clients often tell me that they appreciate how I take time to explain everything to them and answer all of their questions so together we can find the best option for them. If you would like to talk more about buying your first home, feel free to reach out to me. I’m here to help!