Are you ready to purchase a home? Is the rising cost of rent impacting your wallet? If so, you’re not alone. It is now estimated that it’s more affordable to buy versus rent in 66% of housing markets in America todayˡ. In fact, according to Realtor.com, the current average rent accounts for more than 30% of the typical American’s household income ($67,521 a year, on average), which exceeds the recommended amount to spend on housing.
Purchasing a home, however, can be daunting and often considered out-of-reach because of various factors, like having low-or-moderate income levels or less-than-ideal credit. Another factor that may impact someone’s ability to purchase a home could be not having enough money saved for a down payment.
Need help saving for a home? Here are five tips that can help.
What is a Down Payment?
Most mortgage lenders require homebuyers to have enough money saved to cover a percentage of the home’s value that is being purchased. For example, some lenders offer qualified homebuyers the opportunity to buy a home with a down payment of as low as 3.5% of the home’s value. That would mean, in order to purchase a $100,000 home, a homebuyer would need to have at least $3,500 saved for a down payment. It’s important to keep in mind, the higher the home’s price, the higher the down payment needed. Plus, homebuyers are often faced with the difficult decision of utilizing all of their savings to accommodate the down payment requirement and being left with nothing as an emergency fund or enough resources to make any necessary home updates.
The good news is, there are several qualified programs available to potential homebuyers needing help buying a home. There are even down payment assistance programs.
To find out more about down payments to buy a home, read, Wait, Are You Saying I Don’t Need a 20 Percent Down Payment to Buy a Home?!
What’s an FHA Loan?
Insured by the Federal Housing Administration, an FHA Loan is simply a government-backed loan offering homebuyers an option when they don’t qualify for more conventional mortgage solutions. What makes the FHA Loan so attractive? With 15 and 30-year fixed-rate options, an FHA Loan features lower down payments and the ability to qualify with less-than-ideal credit. In addition, it allows homebuyers the ability to utilize monetary gifts from friends, family, or their employers to help them qualify for the loan.
Some restrictions do apply, like the homebuyer must be employed and able to show proof of employment, ensure total monthly debt payments don’t exceed a certain percentage of their income (also factoring in the mortgage payment), wait a specific time period after a bankruptcy or foreclosure, and prove they are only using an FHA Loan to purchase a primary residence (not a vacation home).
What is a HomeReady® Mortgage?
Part of Fannie Mae’s program, HomeReady Mortgage is a mortgage program that focuses on low-to-moderate income borrowers.
Why should a potential homebuyer consider a HomeReady® Mortgage?
▪ Low down payment options
▪ Rental income can be factored into loan approval²
▪ Ability to count additional sources of income toward mortgage qualification
▪ 100% of the down payment can come from down payment assistance
▪ Private Mortgage Insurance (PMI) can be canceled once the loan balance criteria is met
What are some of the requirements of a HomeReady® Mortgage?
▪ Income limit is 80% of area median income (AMI)³
▪ Reliable income and employment
▪ Minimum credit score of 620
▪ At least one of the borrowers in a household must complete a homeownership education course4
What is a Thrive Mortgage Loan?
Offered through First Bank Mortgage, a Thrive Mortgage Loan is a simple, straightforward mortgage that’s designed for homebuyers wanting to purchase a lower priced home. With loan amounts as low as $30,000, a Thrive Mortgage Loan offers low, fixed interest rates and down payment assistance (matching up to $2,000).
Keep in mind, there are certain requirements and the Thrive Mortgage Loan is only offered in specific counties. To find out more and where our Thrive Mortgage Loan is offered, visit First.Bank.
Ready to get started on the path to homeownership?
Contact First Bank Mortgage by submitting your contact information, contacting us at 800-760-2265, or by simply clicking Meet the Team and finding a knowledgeable Home Loan Advisor (HLA) in your area!
ˡthezebra.com/resources/research/renting-statistics
²Renter must live with primary borrower for at least one year.
³Including low-income census tracts.
4Educational course must be from a qualified provider.