Tress Realty Group
  • Home
  • Investors
  • Homeowners
    • Selling >
      • Sale Prices
    • Buying >
      • Land
      • New Jersey 55+
  • News
  • About
  • Contact
  • Send Out Cards

The Myth of 20% Down Payment When Buying Your Home

10/13/2016

0 Comments

 
Picture
Buying a home is out of reach. It will take years for me to save 20% for the down payment!
Good thing you do not need 20% for a down payment. Let me repeat that: You can buy a home without having 20% to put down.
But I heard on the news that you needed 20%…
Many news “reports” are no more based in reality than the prediction given for the 7-day forecast

Before we dive into your options, we should ensure clarity on the terminology:
down pay·ment
noun
  1. an initial payment made when something is bought on credit
  2. is typically indicated as a percentage of the sales price

Your down payment can come from bank accounts, stocks or mutual funds, an inheritance or a gift from a family member and even a retirement portfolio.

Requirements vary based on loan type and homebuyers purchasing a primary residence will always have lower down payment requirements than an investor or second home buyer.

FHA - Federal Housing Administration

FHA loans have been popular with buyers for almost 80 years since they launched in 1934. Requiring a scant 3.5% down and boasting some of the best “2nd Chance” underwriting guidelines available in 2015, FHA continues to be a mortgage financing mainstay.

VA - Veterans Department

Introduced as a reward and incentive for service to our country; VA mortgage financing  has also served America.

In 2012, the Department of Veterans Affairs announced it has guaranteed $20 million in home loans since its home loan program was established in 1944 as part of the original GI Bill of Rights for returning World War II Veterans.

To be eligible for a VA loan, you must have served in the U.S. Armed Forces, or have been a member of the National Guard or Reserves. In some cases, spouses of deceased veterans are eligible as well.
VA underwriting is very similar to FHA underwriting in terms of leniency.

USDA - US Department of Agriculture

Dubbed the “Farmer’s Loan” and funded by the USDA, the United States Department of Agriculture, this rural housing incentive is available to much of small town America.

Offering a low interest, low down payment mortgage option for low to middle-income families, USDA financing can present one of the best mortgage bargains available in the market.

There are geographic requirements for the property itself, and a lender can definitely help you figure out if your dream home qualifies for this program. The USDA program is commonly used in towns with a population of 25,000 or less.

(New) Conventional 3% Down Program

The once dormant Fannie Mae 97% loan-to-value program has arisen from the ashes as of December 2014. Thankfully, the Federal Housing Finance Authority (FHFA) who controls Fannie and Freddie, realized that many Millennials were staying on the home buying bench due to lack of assets.

They also found FHA financing pricier than they prefer and lacked a reasonable conventional mortgage alternative.

As it happens young people in the Millennial demographic had a hard time saving during the Great Recession. Being under-employed and underpaid makes it difficult to save thousands to put towards a down payment.

It does not, however, indicate that savings-challenged Millennials are a greater credit risk. In fact, many have impeccable credit that often works in combination with upward job mobility potential to make them a very low credit risk.

The conventional 3% down mortgage is a solid option to FHA financing.

The 3% down payment program is limited to loan sizes of $417,000 or less. Loans in high-cost areas are permitted, but loan sizes remain capped at local conforming loan limits.

State and Local Assistance Programs

Every state has at least one home-buyer assistance program, most have multiple options. The majority of the programs available from state housing and finance agencies are geared to low and middle-income buyers.

However, there are also programs designed to stimulate neighborhoods or incentive buyers who serve the community as a firefighter, policeman, social worker or teacher.

Individual communities and even neighborhoods allocate funding toward housing assistance and neighborhood revitalization too.

It pays to check HUD’s “Buying a Home” page, in addition to researching your official county and city government sites for local incentives.

Source: The Balance
0 Comments



Leave a Reply.


    Picture

    Tress Realty

    Tress Realty Group compiles some of the best real estate news, tips, and information for buyers, sellers and investors.

    Get started with your home search at www.TressHomes.com.

    Archives

    April 2020
    January 2019
    October 2018
    July 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    June 2013

    Categories

    All
    Chatham
    East-brunswick
    Fair Haven
    Glen Ridge
    Hoboken
    Home Sales
    Maplewood
    Millburn
    Montclair
    Ridgewood
    South Orange
    Summit
    Tress Homes

    RSS Feed

Home

Website disclaimer and copyright

​
Use of the information and data contained within this site or these pages is at your sole risk. If you rely on the information on this site you are responsible for ensuring by independent verification its accuracy, currency or completeness.  It is provided “as is” without express or implied warranty. 

Some properties which appear on this web-site may no longer be available because they are under contract, have been sold or are no longer being offered for sale.  Images uses for navigation may be for properties in different towns, and are not intended to be considered anything other than representative of the types of houses that may be found in a particular municipality.  All data and/or search facilities on this site are for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties that consumers may be interested in purchasing.

Tress Realty Group cannot guarantee the accuracy of the IDX/MLS data created by outside parties. Tress Realty Group further assumes no responsibility for any misleading content or incorrectly listed information due to such negligence. All ancillary information presented on this web-site is not guaranteed and should be independently verified by the users of this site. Tress Realty Group makes no warranty, either expressed or implied, as to the accuracy of the data contained within or obtained from this web-site.

Tress Realty Group accepts no liability for any interference with or damage to a user’s computer, software or data occurring in connection with or relating to this Site or its use or any website linked to this site.  Further, Tress Realty Group has provided Hypertext links to a number of sites as a service only. This should NOT be taken as implying any link between us and those various organizations or individuals.

Disclaimer: this website may be supported by ads and participation in affiliate programs. We may earn a commission when you click our links. The information included in this post is for informational purposes only and should not be taken as legal or financial advice.

Site copyrighted by Tress Realty Group LLC  © 2016-2022, all rights reserved.
  • Home
  • Investors
  • Homeowners
    • Selling >
      • Sale Prices
    • Buying >
      • Land
      • New Jersey 55+
  • News
  • About
  • Contact
  • Send Out Cards