First-time Home Buyer Down Payment Assistance
If you are a first time home buyer*, this information is vital to your home purchase. Please read this carefully.
The first thing you know about buying a home and getting a mortgage is that down payment and closing costs are separate costs. First time home buyers often confuse the two.
- A down payment is a percentage of the purchase price required at closing to obtain the mortgage. For example, an FHA loan requires 3.5% down payment to get the loan. This amount can be a gift from a family member or down payment assistance. Consult with us about gift funds before accepting any money. If it's not documented properly it could ruin your loan qualification. There are special loans still available that do not require a down payment (100% Financing) but the home must be located in an approved area. Contact us about the areas that are approved.
- Closing costs are fees associated with the purchase of the home, such as, title insurance, lender underwriting, taxes, and escrows (pre-paid property tax and insurance) to name a few. Sometimes the home seller will contribute toward some or all of these fees. These fees range from 3 to 6% of the purchase price. We can provide you an estimate of these costs.
Secondly, buyers must understand that down payment assistance is not for people with poor or bad credit. It is for people who have moderate to excellent credit. In most cases, a minimum of a 640 credit score is required.
Lastly, buying a home requires some out-of-pocket expenses prior to obtaining and closing the loan that are not part of the down payment or closing costs. These fees include: a deposit on your purchase contract (usually 1% of the purchase price with a minimum of $1000), a $300 - $350 home inspection (not legally required but highly recommended), and a $400 - $500 appraisal required by the lender to determine the market value of the home. You will need a minimum of $1500 to start the process. Plus, some loans require a minimum of two months payments, taxes and insurance to be left in savings after the loan closes (monies held in IRA or 401K satisfy this requirement). When we qualify you, we will be able to tell you if this will be required for your loan program.
As a First Time Home Buyer you may be eligible to up $7500 for down payment assistance and in some cases more. We can guide you through the process of submitting your application for an opportunity to receive these funds. All of these funds have income limits depending on the number of persons in your household. We can calculate what the income limit will be for your family.