So, you are thinking of buying a home? For many years you could purchase a new home with very little down … if anything. Contracts could be written to reflect no down payment, 100% financing, and even 6% seller concession. Many consumers would find themselves in a new home with nothing out of pocket. While this certainly sounds like a win-win situation, it eventually helped contribute to the market downfall. Owning property that was financed for more than the home was worth left many high and dry when they fell on hard times.
The average home price in 2012 was approximately $230,500; with the standard down payment requirements of 10-25% consumers should expect to come up with $23,000-$58,000 for their down payment. This down payment may be in addition to closing costs which usually range from 3-6% of the sales price. WOW, that’s a lot of money right? Well, homeownership is still not out of the question ….
Today, when buying a new property, many consumers that already own a home will be fortunate enough to be able to use the developed equity from their existing home as a down payment on their new home. For new home buyers or home owners that have minimal equity, there are still some options available to assist.
VA Loans:
The Veteren Administration offers loans to those who have served for our country with very competitive rates and minimal to no down payment required. Also, a noted benefit of a VA loan is that mortgage insurance is not required, even at LTVs of over 80%. These loans are the perfect solution for Veterans and Active Service members.
FHA Loans:
For consumers that do not qualify for a VA loan, the next best bet is an FHA loan. The Federal Housing Administration, founded in 1934, is an insurer of mortgages which provides lenders with protection from losses resulting from defaulted mortgages. Since 1934 FHA has insured over 34 million homes. The down payment requirements … only 3.5%. Some states and national agencies offer grants or silent 2nd loans that will help homeowners secure this 3.5%. This programs are a bit difficult to obtain in today’s market, so, as a standard, if you are looking to buy a new home you should save at least 3.5% of your estimated home price before looking to buy.
There are many products available for buyers today … the morale of the story, when you are ready to buy a home, start saving and get ready to sign on the dotted line! And the best news … if your home loan product does not require a down payment, you will have money set aside for a fun housewarming gift to yourself!!!
For more information, visit me on my LeaderOne Financial website!!!
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