(ModernSurvival.org) – Becoming a homeowner is a dream shared by many Americans. Unfortunately, the costs associated with purchasing a home often push this dream just out of reach. One of the most significant issues potential buyers face is the cost of a down payment. Many believe that a 20% down payment is required to purchase a home, but this is a common misconception. There are actually several assistance options available that can help people gather the resources needed to make a down payment.
Help is Out There
The down payment is the portion of money the buyer puts down at the time of purchase and is generally required when buying a house. This lump sum counts toward the overall purchase price, and the mortgage is calculated based on the amount left over. Thankfully, there are options out there that can help with this down payment. These include:
- Down Payment Assistance Grants
- Federal Loans
- Chenoa Fund
Down Payment Assistance Grants
Grants are forms of assistance that do not need to be repaid. In essence, they’re free money! There are down payment assistance grants available that can help a potential homeowner get started on their down payment. To meet the eligibility requirements to qualify for such a grant, one must generally make under a certain amount of money (as determined by the funding institution). These grants are available from local housing authorities, non-profit organizations, and even some employers.
There are several different types of federal loans that can help a buyer purchase a home. Here are a few examples:
- VA Loans
- FHA Loans
- USDA Loans
The first federal loan on the list is the VA loan, which comes from the United States Department of Veterans Affairs (VA). Eligible service members and their families can apply for a VA loan. This specific type of loan offers the homebuyer the opportunity to purchase their new house without any down payment at all.
The Federal Housing Administration (FHA), a division of the United States Department of Housing and Urban Development (HUD), insures these loans. FHA loans offer buyers with a credit score of 580 the opportunity to purchase a home with a down payment of only 3.5%. Those whose credit score lands between 500 and 579 can buy with a down payment of 10%. Either way, this is much less than the 20% most Americans expect to dish out.
The final loans on the list are offered by the United States Department of Agriculture (USDA) Rural Development Guaranteed Housing Loan Program. Like the VA loans, the USDA loans provide the option to purchase a home without a down payment (but only to eligible rural homebuyers).
The CBC Mortgage Agency provides this nearly nationwide down payment assistance program (it isn’t available in New York). The Chenoa fund provides homebuyers up to 3.5% payment assistance on their down payment. For those who only require a 3.5% down payment (such as those with an FHA loan), this is a massive helping hand.
The Bottom Line
Don’t get caught up in the common misconception that you have to have 20% down before you can start buying a home! Thanks to the variety of assistance options available, gathering a down payment for a home may be easier than you think. In some cases, you may not even need a down payment based on the type of assistance you get. Talk to a lending specialist and see what options are available for you.
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