There are many first time home buyers who think that they need to save up a large amount for a down payment. Most of the time, waiting to save up funds can either price them out of a market with rising home prices (like the Phoenix area is now, especially in the lower price ranges) and they end up paying more for a house that they could have bought last year for less. On the flip side, I have also spoken to first time home buyers who hear about the down payment assistance programs and have no money saved at all, and find qualifying difficult. How much down payment to have can be a fine balance, and there are many different options available.
There is increasing difficulty for first-time home buyers to save for their down payment as indicated in the graph. Several factors that contribute to this trend include rising rents, rising home prices, student loan debt and flat wages.
Some would-be buyers feel they cannot buy a home today but a large part of those decisions may be based on inaccurate assumptions.
Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for first-time buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%.
There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment.
There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit their parents.
In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.
In Maricopa County, we also have government down payment assistance programs like the Homeowners For Arizona, a 5% down payment grant for a conventional loan. There is also the Home in 5 for FHA loans, where the grant can cover most if not all of your down payment. However, this doesn't cover closing costs (it can be difficult in competitive price ranges to have the seller pay for them) so you'll still want to have some savings. Knowing what the best loan program for you is prior to looking for a home is one of the many reason's it's a great idea to talk to a lender first. Contact me today at 480-355-8645 for a recommendation of some of the best loan officers in Chandler, Gilbert, and the rest of the Valley!
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