WEEK 3

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DOWN PAYMENT AND CLOSING COST

  • If you are a first-time homebuyer or haven’t purchased a home using a mortgage in 10 years or more, you qualify for what’s called an FHA loan. This is one of many loan services offered by the government to help home buyers purchase a home at an affordable rate.  Using this program, you can purchase a home with a down payment of only 3.5%. Using simple math, if a home is $100,000 you would only need to put down $3,500.

     

  • To obtain a down payment, there are many different down payment assistance programs for which you may qualify. Some may even pay up $15,000 of your down payment, covering the entire amount.  Please use this site to see what programs are available in your state or county. https://www.nerdwallet.com/blog/mortgages/first-time-home-buyer-programs-by-state/
  • FHA loans have been the go-to low down payment option for decades, but newer products are entering the market, such as Fannie Mae’s HomeReadyTM, which requires a 3% down payment.

     

  • Saving for your down payment can be a bit challenging but can be achieved with effective planning and budgeting. Lenders would like to see the down payment amount remain in your bank account for at least two (2) months. Part of your down payment could be a gift, but it must be from a family member and they will have to submit a letter confirming it’s not a loan.

     

  • Further in the process, your realtor may be able to help you get what is referred to as concessions. Concessions are monies paid by the seller to cover a small portion of your down payment and closing cost. The seller can legally pay up to 6% of the home’s buying price. In simple math terms: if your home’s buying price is $100,000, the sellers can cover $6,000 of your closing cost. Text one of our Realtors in the chatbox for more info.

     

  • Closing costs typically range from 2% to 5% of the home’s purchase price. Thus, if you buy a $200,000 house, your closing costs could range from $4,000 to $10,000. Closing fees vary depending on your state, loan type, and mortgage lender, so it is important to pay careful attention to these fees. Therefore, it is important to have a realtor who can get you concessions from the seller.

HOMEWORK: 

Figure out what price range you can afford and see how much you need to save in order to purchase using this link https://www.fha.com/calculator_afford Afterward, work toward saving for this cost by adjusting your budget accordingly.