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The McMullen Group Blog

Down Payments and Closing Costs: Having A Hard Time Finding the Money?

Joseph Coupal - Monday, June 19, 2017

McMullen Group, Prime Lending, Boston, Hanover, MAHome Ownership Programs Can Help

Coming up with the cash for a down payment and/or closing costs on a house may seem challenging, or even impossible, to some homebuyers, but it doesn’t have to be. There are a number of home loan programs to help reduce the amount of cash you pay at closing. But for many buyers and even real-estate agents, the programs are off-the-radar, and they don’t know how simple applying can be.

That was the finding of RealtyTrac, an Irvine, California-based real-estate research firm and Down Payment Resource, an Atlanta-based company that aggregates programs for real-estate agents and buyers. Interestingly, the 2016 report also revealed that buyers using available down-payment assistance programs could save an average of $5,965 on the down payment of a medium-sized home.

Down Payment Averages Falling

And while the traditional rule of thumb and benchmark for a down payment is 20% of the home’s price according to MortgageCalculator.org, estimates from the Home Buying Institute suggest that the average down payment is actually around 10%. Last summer’s Ellie Mae Origination Insight Report agrees, finding average home purchase down payments are shrinking as more first-time homebuyers enter the market and as mortgage guidelines ease nationwide. Ellie Mae also notes that down payments for government-backed loan programs are even lower: FHA, for example averages 4%, while VA loans averages 2%.

There are a number of programs that can help you make your down payment affordable, many with low- and no-down payment options; and some connected to government-backed loan programs.

  • NeighborhoodEdge® Closing Cost Assistance – Exclusively offered by PrimeLending, this program offers up to $1,500 in closing cost assistance for qualified homebuyers in all 50 states; the property must be located in a low-to-moderate census tract area.
  • Conventional 97 – available through Fannie Mae, this program requires a 3% down payment and is available for the purchase of single unit primary residence properties. It’s best suited for buyers with excellent credit or average credit. At least one borrower must be a first-time homebuyer.
  • HomeReady™ – this Fannie Mae-backed program allows for a 3% down payment and offers discounts on mortgage rates and private mortgage insurance; it’s targeted at multi-generation households where multiple people contribute to the family income and can be anyone with an income below the average for the area.
  • Home Possible® – a Freddie Mac mortgage option; it allows a down payment of only 3%.
  • FHA Loan Program – allows for down payments of just 3.5% and can be used for primary residences with 1-4 units; a big advantage is that FHA mortgage rates tend to beat conventional rates.
  • VA Loan Guaranty – this program is available to veteran or active duty military borrowers; there is no down payment requirement and no mortgage insurance charge, regardless how little you choose to put down.
  • USDA Home Loan – is available to buyers in less dense parts of the country, including rural areas and many U.S. suburbs as well; it allows for 100% financing and offers reduced mortgage insurance costs as compared to other low- and no-down payment loans.
  • 203K Renovation Loan – a great solution if your first home is a fixer-upper; if your purchase requires repairs, there’s a low minimum down payment requirement of only 3.5% and the loan covers the value of the property plus the repair costs.

We’ve only listed some of the many options available here. Before you give up on your dream of owning a home because you think the cash required at closing is insurmountable, speak to a PrimeLending McMullen Group loan officer. They can assess your individual case and determine which of the many programs available is suitable for your specific needs.

Contact us to today to get a better sense of what is possible and find an advocate that can help guide you every step of the way through the option chosen.

Prime Lending - By Jack Honig