Thinking of Buying? Don't Let the Down Payment Get in Your Way
July 22, 2014
“I’d love to buy a home, but I just can’t afford it.”
This is a common refrain from people who want to buy a home, but feel that being a homeowner is beyond their reach financially. The idea of having a monthly mortgage payment for 15, 20 or 30 years can be overwhelming for those who are used to having a six-month or one-year lease.
However, it’s often not the idea of having a mortgage that scares people away from buying, but rather the down payment. Having to put down a chunk of cash upfront is daunting for many people.
If this describes you, you shouldn’t be afraid of the down payment and don’t let it become an obstacle to buying.
You May Need Less Than You Think. A recent survey by research firm Zelman and Associates found that most people believe lenders require a down payment of 11 to 15 percent. This mistaken belief of needing a large outlay of cash may be the number one reason many potential homebuyers are staying on the sidelines. Down payment requirements depend on several different factors including credit score and the type of loan you’re getting—and can vary from lender to lender—but you may not need 11 to 15 percent down, let alone the old industry standard of 20 percent down. There are many different loans—from FHA-backed loans to VA loans to other federally-funded loan programs—that require a low down payment or even no down payment at all.
You Can Come Up With the Cash. As we’ve discussed before, potential homebuyers have plenty of different options in terms of coming up with the cash for a down payment. Receiving cash gifts from friends, family or outside organizations, borrowing against your 401(k) or IRA, or taking advantage of down payment assistance programs are all options that may be available to you. Of course, saving up the cash yourself may be the best way, but if you don’t have a lot of savings, you should start setting money aside now. If you put away money on a regular basis—not matter how small the amount is—your down payment nest egg will be ready before you know it. The key is to make a savings plan and stick to it.
The bottom line is this: the amount of cash you’ll need for a down payment is not set in stone and there are plenty of options for coming up with the cash needed. Also, keep in mind that lenders want your business and will help you in any way that they can to overcome the down payment obstacle. If you have decent credit, you can almost certainly qualify for a mortgage and become the homeowner you’ve always dreamed of becoming.
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988. Licensed by the Commissioner of Banks - License No. MB2671