1. Crowdsource Your Home Purchase
You may have heard of people using sites such as 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.
2. Ask the Seller to Assist
When sellers want to a get a deal done quickly, they may be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.
Called seller concessions, talk with your real estate agent. He orr she may help you negotiate for something like 1-2% 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.
3. Explore Government Options
The U.S. Department of Housing and Urban Development (HUD), offers a number of homeownership programs, including aid with down payment and closing costs. 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.
4. Check with Your Employer
Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.
5. Take Advantage of Special Lender Programs
Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception about buyin a home is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that only require 3% or 3.5% down.”
FHA mortgages, for example, can require as little as 3.5%. Bear in mind, however, that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.
Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”
See? It doesn’t have to be all that hard. There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!