There are myths and misconceptions surrounding how much of a down payment is required to purchase a home. However, the amount of upfront cash needed typically isn’t as large as people think. Are these misconceptions keeping potential buyers from searching for a new home?
Several loan programs exist that require little to no money down. A housing counselor can help would-be buyers find out more about their options. The Consumer Financial Protection Bureau maintains a list of HUD-approved housing experts that offer pre-purchase counseling free of charge.
Working with a home loan expert who knows the local market is a great way to find out about loans and loan programs, said Ron Wivagg, national sales support manager for Prosperity Home Mortgage, LLC, a full-service mortgage banker and wholly owned subsidiary of The Long & Foster Companies.
Prosperity offers two programs, “BorrowSmart,” which provides qualified buyers up to $2,500 in down payment assistance, and “Welcome Home,” which allows qualified buyers 100% financing with no mortgage insurance by combining a first mortgage with an interest only second mortgage. These programs were created to reduce the financial burden of homeownership for qualified buyers.
A mortgage consultant can also help homebuyers shop around for options that might be appropriate for their situations, such as U.S. Department of Agriculture loans that help low- and moderate-income buyers in rural areas, or state and local grants to help local homebuyers who qualify for help, Wivagg said.
“You should always contact your county authority and look for those types of opportunities,” he said, offering two examples: Maryland’s SmartBuy program helps qualified buyers eliminate student loan debt, and in Prince George’s County, Maryland, a down-payment assistance program called Pathway to Purchase.
Even with conventional financing, down payments can be as low as 3%, although mortgage insurance would be required for someone putting down less than 20% of the home’s appraised value. Some programs mitigate the cost of mortgage insurance for buyers who qualify.
Wivagg explains that anyone who is serious about buying a home but is nervous about the costs involved could simply start with getting pre-approved, which entails looking at their financial picture. Then, they can start looking at financing programs that match their individual needs.
If you’re interested in purchasing a home, contact your local real estate agent to help you with first steps. You can also connect with a Prosperity mortgage consultant to discuss your financial options.