• Grant Hock

Down Payments - It doesn't have to be your money

Updated: Apr 5

"I could pay a monthly mortgage, but there is no way I could come up with the down payment to buy a home."

Sound familiar? - This is something I have heard from a lot of people. Many could be paying less money for a monthly mortgage than they do for their rent. Coming up with a lump sum of money for a down payment on a home can be intimidating if you don't have a game plan. This article will help give you some insight on ways to overcome that.

Who is the best person to talk to about down payments?

I am not a mortgage lender and I don't want to seem like I'm trying to be one. The best person to talk to about down payments and financing is a qualified mortgage lender. The purpose of this article is to give an overview of down-payments, not to give advice. If you would like to connect with a local mortgage lender, I know plenty that are really great at what they do. Feel free to give me a call and I can put you in contact - 603-315-7804.

What is a down payment?

A down payment is the amount of money you will pay in cash up front when purchasing a home. When you get pre-approved to buy a home, the mortgage lender with help you determine how much money you can borrow after paying for the down payment. There are a few different types of mortgages that require different percentages of the loan amount - but that is for another article. For the purpose of this - you just need to know that there will be a sum of money owed up front in order to purchase a home when financing.

So how much do I need?

I know this isn't the answer everyone wants to hear, but it really depends. The more money you put down the less you will have to finance. How much money you put down will depend on what type of financing you go with. Some only require 3.5% some require 5% and some circumstances require more or even 20% down. It really depends on your circumstances. Talk to a lender to get the best idea.

Down Payment Assistance

There are programs out there that can help you with your down payment. In fact, there are a few different types of assistance. Here is what you need to know:

  1. Many different ranges of income can still qualify for down payment assistance. You do not have to have a specific income in order to qualify for some of the down payment assistance programs

  2. You can use more than one type of down payment assistance on the same home. Here are some examples

  • Grants - I'm not talking about me paying for your down payment. However, there is free money out there that you can apply for that may actually pay for some or all of your down payment if you qualify! This is money that you wouldn't have to pay back.

  • Decreasing Debt Over Time - This is a set up where money is borrowed for a down payment, but over time the indebtedness decreases for every year you stay in the home. An example would be a staying in the home for 5 years, and the amount of money borrowed for the down payment is forgiven by 20% for every year you are in that home. That means after 5 years the total downpayment amount would be forgiven

  • Pay Back After Selling - This is a situation where the money for down payment is given upfront, but when you sell your home (assuming you sold it for more than you bought it) you will have to use part of your profit to bay back the down payment. A majority of these have 0% interest over the time the homeowner is in the home.

So there you go! A few ways to combat the down payment when thinking about buying a home. If you are thinking of buying or selling, please reach out!

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