Down payment funding alternatives

For many buyers, especially first-time buyers, saving up the funds for the down payment can be a seemingly insurmountable hurdle to home ownership. This doesnt have to be the case. As your mortgage consultant, I can help you find creative ways to come up with your down payment.

Using a gift for your down payment
One way to fund a down payment is by using a gift. For many loan programs, a gift may be used for a portion or all of the required down payment. Money given as a gift for a down payment cant come from anyone. Family members are the usual source. And sometimes an employer may also be acceptable.   If this is an option open to you, please let me know.  I can help you determine which loan programs accept gift funds for down payments and who may give the gift.   Ill 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 paid back.

Zero down mortgage loans

Service persons and veterans can qualify for a VA Loan that requires no down payment.  VA Loans are guaranteed by the U.S. Department of Veterans Affairs.  In addition to no down payment, these loans usually offer a competitive fixed interest rate and limited closing costs.  While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.

There are many different loan programs that will finance 100% of the purchase price of a new home. Some of the programs are one loan and may require mortgage insurance while others use a combo loan such as 80/20 to avoid private mortgage insurance. Some loan programs will finance 103% of the purchase price with the extra funds being used for closing costs. Let me help you find the down payment and mortgage alternative thats right for you.

Down payment assistance charities

If a willing and able family member is not available, buyers now have the option of turning to a non-profit for down payment assistance. 

Caution should be taken when searching for a down payment assistance charity (aka down payment assistance program).  There are many reputable organizations providing buyer assistance, but there are dubious ones as well.  You may want to research the charity with the Home Gift Providers Association (HGPA) (http://www.downpaymentalliance.org/) before making a commitment.

Generally, a down payment assistance charity will give the buyer money for a down payment that does not have to be repaid.  The seller will contribute an equal sum to the charity at closing or soon after.  The seller will also pay an administration fee to the charity.  Sounds good, right? 

This can be a good option for buyers who dont have other means of securing a down payment.  However, you should be aware that this means of funding the down payment may inflate the selling price of the house.  Youll want to consult with your real estate professional about how such a program may affect the selling price.