Gone are the days of markets laden with low-price foreclosures and tax incentive programs for first-time buyers. Our regional real estate market has gotten more competitive over the last decade, and buyers at many price points must be ready to make an offer on a home as soon as they find their perfect fit.
The first step to knowing you’re ready to make an offer is understanding your financing. And for first-time buyers, that probably means coming up with a down payment. With this in mind, we’ve put together some of the most frequently asked questions we get about down payments.
Here is our introductory down payment Q&A for home buyers:
Q. May I use a gift from family members as part of my down payment?
A: You sure can! In many cases, immediate family can provide monetary gifts to be used as a down payment. There are restrictions of course, and strict documentation will be required well ahead of your purchase. Don’t forget that surprise sources of down payment within two to three weeks of closing could delay the closing. But, we will gladly walk you through the finer details of this process. Be sure to mention this option when you fill out an application with us.
Q. May I use funds from my IRA for my down payment?
A: Yes. First-time home buyers can use funds from an IRA under certain circumstances for a down payment. The rules regarding this option, however, can be complicated, especially with a Roth IRA. That’s why it’s important to understand any and all tax implications before tapping into these accounts. Please talk to your tax professional before making any decisions. If you don’t have one, we’ll gladly refer you to a tax professional we trust and work with on a regular basis.
Q. Are there any zero down payment programs available?
A: Yep! It’s true that most of the popular zero down payment programs disappeared in the wake of the subprime mortgage collapse. However, there are still two longstanding government-backed programs that offer mortgages with no down payment: the USDA Rural Development Program and the VA Loan Program. Locally, you can also inquire about several programs through Mountain Housing Opportunities.
A USDA Guaranteed Loan is a government-insured, 100% purchase loan. This means there is no down payment required if you (and the house you intend to buy) qualify for the program. Not all areas qualify, but you’d be surprised how many neighborhoods in your area do. There are income and other limitations, but if coming up with a down payment is challenging, you might want to consider this program.
If you or your spouse is a military veteran, you may qualify for a 100% financed loan from the US Department of Veterans Affairs. More than 29 million veterans and service personnel qualify for this service benefit. Give us a call to find out if you’re one of them.
Q. Are there any other government-insured programs that can help someone struggling with a down payment?
A: Yes. In 1965, the federal government created the FHA loan programs to encourage homeownership throughout the country. FHA-insured mortgages offer many benefits, including a minimum down payment of 3.5%. FHA-insured loans have grown in popularity recently due to the seller’s ability to pay closing costs up to 6% and a temporary increase in loan limits up to $726,525 in certain high-cost areas. These changes have allowed more potential buyers to utilize this program.
Question: Are you ready to buy a home? Make a Mortgage Inquiry Today
At Beverly-Hanks Mortgage Services, we strive to make financing real estate easy and enjoyable. That is why we are staffed with local financing professionals dedicated to prompt, personal service. You will find we offer a broad menu of financing options, very competitive rates, and customer service that is second to none.
See what interest rate you qualify for. Make a mortgage inquiry today!
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For more information on all of our financing services or if you have any questions, call one of our professional associates today: (866) 858-2257.