Buying a home is a great goal, but it’s expensive! Inspection and contract costs, closing costs, and of course, down payments and mortgage costs add up quickly! Saving money for a good-sized down payment is a good idea, not just because it makes you finally secure, but because a larger down payment can actually lower your mortgage interest rate. So here are some unconventional ways to save for your down payment:
People use sites like GoFundMe and Kickstarter to help them achieve their goals all the time. It may seem odd, but you can crowdfund your first home! Sites like Feather the Nest and Hatch my House make it easy for loved ones and friends to donate toward your down payment. It may seem presumptuous, but think about it - buying a home is a momentous occasion (especially if it’s your first time), and you never know how much rich Aunt Sally is willing to help you. According to Hatch My House, that site has helped people raise over $2 million towards down payments.
2. The Seller
Yes, you can ask the seller to help with expenses. This one may sound even crazier than the first idea, but it’s not a joke. Sellers who are anxious to close on a house may be willing to assist you with closing costs - which means you have more money for your down payment. Your real estate agent will be able to advise whether or not this may work in your situation and will help you negotiate with the seller. Depending on the type of loan you get, you could get help on 2-9% of the overall sales price.
3. Government Aid
Did you know there are federal, local, and military programs available to help home buyers? The Department of Housing and Urban Development (HUD) offers aid for closing costs and down payments based on income, location, or profession. Depending on location, some professions like teachers, EMTs, law enforcement officers, and firefighters can apply for a 50% discount on the home’s value. The VA will also provide part of a home loan through commercial lenders for veterans, many times which require no down payment or private mortgage insurance. You can also look into city-sponsored programs that partner with lenders, attorneys, and other entities to give low-income buyers a break. If you fall into any of these categories, take a look at what’s available to you. It may be more than you think!
4. Employer-Funded Programs
Many companies have Employer Assisted Housing (EAH) programs that help mid- to low-income workers get a home. For example, the EAH program at Washington University in St. Louis allows eligible employees to receive forgivable loans for home purchases in some neighborhoods. And in Pennsylvania, you can apply for an interest-free loan up to $8,000 and closing cost assistance if you work for a company that’s part of the EAH program. To find out if your employer offers an EAH program and whether or not you qualify, just get in touch with your HR representative.
Although a bigger down payment is better to keep down interest rates, some lenders do offer mortgages with smaller down payments. Many times, lenders who allow these smaller down payments (as low as 3% down) also require mortgage insurance. Insurance is an addition upfront and monthly expense. But there are exceptions. For instance, TD Bank offers loans with only 3% down and no additional mortgage insurance. So it’s up to you to shop around and talk to your real estate agent to find the best deal for your situation.
I hope you explore these avenues so you can buy your dream home and come out with the best financial situation possible. As always, if you have additional real estate questions, please contact me through email, phone at (863) 450-8847, social media, or my mobile app. I’d love to assist you!