You have probably heard that it’s possible to afford the cost of moving into a home without a down payment. Oftentimes, however, this type of assistance is only available to veterans or those who reside in rural areas. While this is true, there is plenty of financial assistance available to help people obtain a home without a down payment.
Aid is available from the government and major banks to help provide you support to move into a new home. With more than 50 percent of renters spending more than 30 percent of their actual income on a place to live, it would make more sense to pay down a home loan rather than rent, especially if it will continue to increase.
Making payments on a home and home loan provides you with equity, or a big line of credit to use for the future. You can use that to your advantage in the future.
Government grants available as down payment assistance
The biggest problem most home buyers have is coming up with enough money to use towards the down payment. Being able to afford the monthly home loan is not a problem, but saving to place a down payment on a home without putting a big dent in your overall savings is hard. You may not want to be “cash poor” in the event of an emergency.
Down payment assistance is available in most areas, you just have to find the right lender that can help you. Visit lending websites to learn more, or call a lender directly to inquire about financial assistance programs.
Programs such as Wells Fargo’s NeighborhoodLIFT program can help people in particular cities or areas receive financial assistance in the home buying process. The most recent area Wells Fargo has targeted is the Kansas City, MO area, and pledged to provide $6.5 million to help the area, with a total of $5.5 million going towards programs and down payment assistance grants to help home buyers who cannot afford to make a substantial down payment on a home. Previously, Wells Fargo helped provide this same type of assistance in cities such as Los Angeles, New Orleans and New York.
How to improve your chances at receiving assistance
Steady income for at least the past two years, minimal debt, a good credit history and a credit score in good standing are all major factors that can qualify you for a down payment grant. Most programs only offer assistance to first time home buyers, but there are programs that exist to help previous home owners who lost their home due in part to poor approval practices by lenders.
Additionally, you can typically only purchase a home with four or less units, anything beyond that is considered commercial property and is not eligible for grant assistance. In some instances financial assistance is only available to single family homes, not multifamily property.
Avoid applying for other types of lines of credit around the time you plan on buying a home. Ideally, you want to have two years of a completely clean credit history. But as long as you can show that you make most of your payments on time, and that your overall debt to income ratio is below 30 percent, you should have no problem obtaining financial assistance if there are grants or programs available.
Why you have to settle for an interest rate
Remember, by receiving a grant you will most likely have to settle for a higher-than-average interest rate. Since grants usually cover only the minimum amount necessary to put down on a home, there is little negotiating power you have with lowering the interest rate.
Years down the line you may consider refinancing your home at a lower interest rate. By refinancing the terms of your home loan and receiving a lower interest rate, you could save tens of thousands of dollars throughout the term of your loan.
If you cannot otherwise afford to move into a home and would like to be the owner of your own piece of property, a government grant or any other type of financial assistance is the perfect way to make owning a home a possibility. The important action for you to take is to call various lenders to see what types of programs are offered, and whether or not you qualify for financial assistance from the government or a bank.Related