18 Nov 2013

Down payments in today’s real estate market

Mortgage CalculatorWith interest rates settling down, the housing market is seeing continued activity from first-time homebuyers, who typically make up about 40 percent buyers. In addition to inquiries about credit requirements, the most common question from first-times is “How much down payment do I need on my first home?”

There are a variety of great options that first-time homebuyers can and should consider, to get them into that first home. For buyers with a good credit score who have their own 5 percent down payment saved, the most affordable option may be a conventional loan with Private Mortgage Insurance (PMI). For this loan, you will be required to provide 2 months of bank statements to indicate that (1) you have the money saved and (2) there are no unacceptable and undocumented large deposits within those statements.

But what if you don’t have a 5 percent down payment saved? Consider these options.

  • Are you a veteran? If so, a VA loan is a great option and allows you to borrow 100 percent of the purchase price of your home. You are required to provide Form DD214, to confirm your military service and a Certificate of Eligibility, to confirm your eligibility for this loan program.
  •  Are you looking at USDA eligible properties? These properties may be eligible for 100 percent financing as well, but must be located in an eligible area. You must also meet certain income requirements, which vary by area and family size.
  • Can you get a gift for the down payment? FHA loans only require a 3.5 percent down payment and allow you to receive a gift from an eligible family member to use for the down payment. Costs are higher than a conventional loan with mortgage insurance, but this will allow you to purchase sooner, without waiting to save that 5 percent.
  •  Do you live in a state that offers Bond Loan programs? Many states including North and South Carolina have some great Bond Loan programs that can help you with down payments.

There are still many options for first-time homebuyers available. With interest rates still low but on the rise and home prices appreciating in many areas, now is the time to consider a home purchase. Your Allen Tate Mortgage Consultant can help walk you through these options.

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By: Lisa Green (Vice President of Loan Origination)

Allen Tate Companies
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