“Water, water everywhere … nor any drop to drink.” – Rime of the Ancient Mariner
If you’re a first time home buyer, you might be able to sympathize with this statement. Thanks to the recent economic recession, there is no shortage of affordable homes, yet due to the mortgage crisis, lending has become tight. Prior to 2007, putting no down payment on a home was a common option for first time home buyers. However, with mortgage lending practices coming under fire in recent years, the option to finance 100 percent has lost popularity. In today’s market, a typical down payment can range anywhere from 10 to 20 percent; however, in this economy, few people have that much cash available to them. Fortunately, there are ways to receive down payment help for first time home buyers, either through a third party lender or private funding.
Where Can You Find Down Payment Help for First Time Home Buyers?
Junior Loans – One option for first time home buyers who need down payment help is to apply for a Junior Loan. Many banks offer Junior Loans to help first time home buyers who would otherwise be unable to meet the down payment requirements for purchasing a home. These loans are typically offered at the state level, are under $50,000, and have fixed interest rates.
Gifts and Gift Registries – Instead of using a traditional bridal registry, many couples who are also first time home buyers are opting to register for a home down payment gift registry. This allows family and friends to donate funds toward a down payment, helping newly married couples reach the goal of owning a first home. To find out more about a home loan payment gift bridal registry as well as a graduation or birthday gift registry, check out myregistry.com or downpaymentdreams.com.
Other Down Payment Assistance Options for 1st Time Buyers
Tax Refunds – Buyers who are receiving a refund on their income taxes can choose to put the extra cash toward a down payment. It’s a great way to make use of money you were not expecting to receive, and depending on how much you choose to withhold each year, can easily contribute to a large portion of your down payment.
Seller Negotiation - Another option may be to negotiate with the home seller for a donation of down payment funds. In a slow real estate market, many sellers may be willing to negotiate untraditional payment terms or purchase agreements. Some home sellers might even consider offering you a portion of the down payment rather than lower their selling price.
First time Home Buyers Tax Credit – $8,000 of tax credit was available for first time home buyers in 2010. A $6,500 tax credit for repeat home buyers was also available, yet both of these incentives have expired. However, service members who were on official extended duty outside of the United States for at least 90 days between Jan. 1, 2009 and May 1, 2010 may qualify for a one-year extension, which could be a great opportunity to leverage funds for your down payment.
Still Strapped for Cash? Consider 100% Financing
With mortgage lending practices coming under fire in recent years, the option to finance 100 percent has lost popularity. Yet there are still programs available to first time home buyers requiring down payment assistance who meet certain eligibility requirements. Before you throw in the towel on your home search, see if you may qualify to purchase with no down payment.
Buying a home is without a doubt one of the biggest decisions a person can make in a lifetime. It’s a large responsibility and all down payment and home financing options should be considered carefully. Before taking a loan or getting knee-deep in a large mortgage, be sure to do a thorough assessment of your financial situation and ensure that you can afford the home you have in mind. With the right financing and adequate information, you’ll be able to move confidently into home ownership.
If you’ve decided to take the plunge and buy your first home, be sure to read our article on questions to ask a realtor when buying your first home.