All about the down payment
For many buyers, especially first-time buyers, saving up the funds for the down payment can seem to be an insurmountable hurdle to home ownership. This doesn’t have to be the case. As your mortgage broker, we can help you find creative ways to come up with your down payment, if one is needed.
No down payment loans
Yes, no down payment loans are still available. Veterans can use a VA loan to purchase a home with no down payment and the USDA Rural Housing Program has a no down payment loan available depending on the location of the property and the income limits of the occupants.
Low down payment loans
Certain HUD owned properties may offer reduced down payment options such as their $100 down program. Home are listed on their website http://portal.hud.gov/hudportal/HUD?src=/topics/homes_for_sale. While an FHA loan still requires a minimum 3.5% down payment, it can be a gift from a family member. Fannie Mae now has a 5% down payment loan that can be from a gift also.
Sources of funds for your down payment
For loan programs that allow gift funds, a gift may be used for a portion or all of the required down payment. Money given as a gift for a down payment can’t come from just anyone. Family members are the usual source. And sometimes an employer may also be acceptable. If using a gift is an option open to you, please let us know. We can help you determine which loan programs accept gift funds for down payments and who may give the gift. We will also supply the gift letter that the person giving the gift is required to sign. The gift letter states that the funds are a gift and will not be required to be paid back.
Money that you have saved that has been seasoned and sourced can be used for the down payment. To be considered “seasoned”, you must have had it in your bank account for 60-90 days prior to the loan application. To be considered “sourced”, you must document where it came from. In most cases money proven to be in your bank account for 90 days is considered to be both seasoned and sourced. If the time frame is less, you must provide the source of the funds.
Loans against secured assets
Loans that you make against a tangible asset, can be used for your down payment, however, the payment on this loan must be included in you debt-to-income ratio. Tangible asset loans can be a new loan against a car that is currently paid off or other property you may own outright. Loans made from a 401k retirement account can also be used and these loans, in most cases, do not have to be included in your debt-to-income ratio.
At First Nations Home Mortgage we answer questions about down payments every day. Consultations are always free!