Programs That Can Help You With A Mortgage Down Payment

February 12, 2020

Dreamstime

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Buying a home is a big step and one many are not ready to make due to the lack of a down payment. While most lenders require 20% down payment for a home, first-time homebuyers will usually have to come up with a minimum of 3.5% down payment, which doesn't seem a lot, until you realize that is still thousands of dollars that you may not have. Fortunately, there are plenty of down payment assistance resources available for first-time homebuyers. There are countless grant programs out there, including Chenoa, state-funded programs (https://www.floridahousing.org), and Good Neighbor Next Door. Chenoa was originally developed to assist Native Americans and other minorities with purchasing homes. It has since expanded to provide assistance to any qualifying borrower who may need assistance. And through HUD, Good Neighbor Next Door offers qualifying public servants, like teachers, law enforcement officers, and firefighters, assistance with a home purchase. First time home buyers may also qualify to borrow from your retirement account. Some taxes or penalties may apply, so talk with your financial advisor first. For a Roth IRA, you could borrow up to $10,000 without penalty to fund your down payment. Other IRAs have similar rules, though they may require that you pay income taxes on what you’ve borrowed. You’re also able to take a loan from your 401K, though there are limits to the amount and you must pay back your loan with interest. The thing that’s really useful in minimizing the amount of money you need to bring to the table is seller credits. While the buyer will still need to show that they could bring the required down payment to closing, it is possible to have a majority of your costs covered by the seller. With a seller credit, the buyer can roll those formerly up-front closing costs into their total loan amount.

SOURCE: Apartment Therapy

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