You’ve heard it said time and time again that a responsible homebuyer puts down 20%, no exceptions. Surely, with enough time and determination, anyone can save that amount of money, right? Well, it depends. For some homebuyers, 20% is a comfortable lump sum to put down on a home. For others, it could take years to save up to that percentage. Not to mention, as rent rates continue to rise, saving for a house has become more difficult with each passing year.
The good news is, there are ways to responsibly purchase a home with a smaller down payment. Plus, qualifying homebuyers can also receive additional financial help in the form of a first-time homebuyer grant.
The 20% Myth
From past requirements to conventional wisdom, the 20% down payment rule has become the norm in the homebuying industry. There are a few major reasons why consumers and regulators alike have come to terms with a down payment of this size, such as avoiding Mortgage Insurance and starting out with a lower interest rate.
However, depending on your financial situation, it may make more sense to put down less on a home and invest in the market or use any additional funds for closing costs and renovations. Simply put, a home’s affordability is not solely about the size of the down payment. Being able to afford a home is about sustaining the mortgage payments and other homeownership expenses over the life of the loan.
In fact, there are a variety of loans that require a down payment as low as 3.5% or no down payment at all for qualifying buyers. At PacRes, we offer a variety of loan solutions for buyers needing more financial flexibility.
First-Time Homebuyer Grants
Though the US government itself does not directly offer loans, many first-time homebuyer grants are a result of federal funding. This funding is funneled to individual states, which then create various grant programs for homebuyers. Because of this, program availability will vary from state-to-state, but in most cases, the requirements will be similar.
For example, most grants can be used to offset some of the purchasing costs, including part of the down payment and closing costs. Plus, these grants do not have to be repaid as long as you live in the home for the required amount of time.
First-Time Homebuyers with Student Debt
Did you know a 2018 report from The Institute for College Access and Success (TICAS) shows 65% of graduating seniors from public and private nonprofit colleges had student loan debt? In Oregon alone, the average amount of student debt in 2017 was $27,885. All of this data is specifically regarding students attending private or public four-year colleges for bachelor’s degrees. The figures increase even further for post-graduate studies.
What does all of this mean? Don’t let student loan debt be the reason you put your homeownership goals on hold. Fannie Mae has three solutions that can potentially help applicants qualify for a conventional mortgage despite their student debt. At Pacific Residential Mortgage, we are proud to offer all three of these solutions in conjunction with Fannie Mae. You can learn more about these options here.
The Bottom Line
Homeownership is possible, even when it seems like it might never work out. Between tax breaks, first-time homebuyer grants, and loan programs that offer flexibility, homeownership is in reach. If you’re unsure what the first step is and how homeownership could impact your financial goals, give me a call today!