There are some popular beliefs about down payments that are actually myths. So before you go thinking you can’t buy a house because of your down payment situation, keep reading.
Down payment assistance is easily available
You may have heard it advertised that there are all sorts of down payment assistance programs available. While that may be true, the process is not usually an easy one. There are certain requirements that need to be met just for you to qualify for assistance. These programs are locally run. You will have to meet certain income restrictions, and some programs are only available for single parents.
If you think that you could qualify for assistance, it is definitely worth looking into, but don’t expect for the process to just be smooth sailing.
You have to have 20 percent down
After the crash of the housing market, lenders became more strict on the amount of down payments they were willing to accept. Many still believe today that you can’t buy a house without a 20 percent down payment. However, there are programs available that allow you to buy with as little as 3.5 percent down.
And if you happen to qualify for a VA loan, then you won’t need a down payment at all. Talk to your lender to see what options are available for you.
You cannot put down more than 20 percent
If you have more than 20 percent that you can put down on your house, it will save you in the long run. Not only will you be paying less interest because you aren’t financing as much, but you could also get a lower interest rate.
The larger the down payment you make, the less risky you are to the lender. You will notice a decrease in interest rate with every 5 percent increase you make in your down payment.
You can use a loan for a down payment
If you have a family member or friend that wants to help you out with your down payment, that’s great, but only if it’s a gift. You cannot use money for a down payment that you have to pay back. The lender will want to see a signed letter stating that the funds are a gift. It’s a felony if you lie on a mortgage application, so this isn’t something to play around with.
If you still have questions about your options for a down payment, talk to your mortgage lender. They can steer you in the right direction or answer your questions for you. However, the bottom line is that when it comes to a down payment, the more you can afford to put down, often the better the situation you will be in. And the best way to prepare for a down payment is to start saving today.