When you search for a new home, there are many considerations to take in. From both a financial and emotional perspective, this is a large change in your life. Whether you have been a home owner before or have always rented previously, it can be challenging to produce the necessary down payment to acquire a traditional mortgage. Since a down payment is very useful, down payment assistance may be what you need.
Home as an Investment
Naturally, your home is a place to live first. However, in some cases it can be helpful to look at your home as an investment. When you think of your home as an investment, the amount of your own money you put into its purchase should be as low as possible. Consider that getting a great deal is one of the reasons why great investors can pocket large returns. By putting in less of your own money, you can receive a nicer home and keep more of your money for other purposes.
Maximizing Your Value
The value you receive from your home comes down to enjoyment and monetary reward. By being able to afford a nicer home, you can raise your family in a nicer area and potentially reap financial benefits down the road from greater appreciation. This appreciation can grow your wealth over time, and can even allow you to upgrade where you live later.
Qualifying for Assistance
Qualifying for down payment assistance works differently depending on what kind of loan you get, as well as what agency you choose to work with. In some cases, your qualification may be automatic based on your status as a veteran. In other cases, you may have to have a certain income or track record.
HomePath is a service offered by Fannie Mae, and is very popular as a down payment assistance vehicle. One advantage that HomePath offers is that your new home does not need an appraisal prior to acquiring the loan, and neither do you need to pay private mortgage insurance. In this instance, your down payment is only three percent of the loan amount instead of the traditional twenty percent. For a $150,000 home, this allows you to put $4,500 down versus putting down $30,000. Depending on your saving rate, this can allow you to be a home owner years earlier than you otherwise could.
The Federal Housing Administration provides down payment assistance through a separate program called HUD, or the Department of Housing and Urban Development. Since the federal government ensures these loans, they are at a lower than average interest rate and sometimes the down payment is minimal, which is a good way to get into a nice home if your credit is less than ideal.
The American Dream Down Payment Assistance Initiative or ADDI allows you to purchase a new home if you are financially disadvantaged. If you have not owned a house for at least three years and qualify as low income, you can use ADDI to qualify for down payment assistance and for a low interest mortgage for your single family home. This can allow you to begin climbing the property ladder from where you are.
VA Loan Guaranty
Veterans, their widowed spouses and active duty military personnel can receive a Veterans Affairs loan that the federal government guarantees. This is a low interest loan that can also include assistance with your down payment if you qualify. In some cases, the amount of the loan can cover the entire cost of your home, making closing costs most of your required money out of pocket.