Mortgage News
Home Buyer's Down Payment FAQs
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With today's combination of lower home prices, some of
the lowest interest rates the industry has ever offered,
and the $8000 tax incentive for first-time buyers, buying
a home has never been so attractive. The only real hurdle
left for many Americans is coming up with a down payment.
With this in mind, we've put together some of the most
frequently asked questions we get about down payments in
today's market.
Q. Are there any no-down payment programs left?
Yes. While it's true that most of the popular no-down payment
programs disappeared in the wake of the subprime mortgage
collapse, there are still two longstanding government-backed
programs that offer mortgages with no down payment: the USDA
Rural Development Program and the VA Loan Program.
A USDA Guaranteed Loan is a government-insured, 100% purchase
loan. This means there is no down payment required if you -
and the house you intend to buy - qualify for the program.
Not all areas qualify, but you'd be surprised at how many
neighborhoods in your area do. There are income and other
limitations, but if coming up with a down payment is
challenging, you might want to consider this program.
If you or your spouse is a military veteran, you may qualify
for a 100% financed loan from the US Department of Veterans
Affairs. More than 29 million veterans and service personnel
qualify for this service benefit. Give us a call to find out
if you're one of them.
Q. Are there any other government-insured programs that
can help someone struggling with a down payment?
Yes. In 1965, the federal government created the FHA loan
programs to encourage homeownership throughout the country.
FHA-insured mortgages offer many benefits, including a minimum
down payment of 3.5%. FHA-insured loans have grown in popularity
recently due to the seller's ability to pay closing costs up to
6% and a temporary increase in loan limits up to $729,750 in
certain high-cost areas, which allows more potential buyers to
utilize this program.
Q. May I use a gift from family members as part of my
down payment?
Yes. In many cases, immediate family can provide monetary
gifts to be used as a down payment. There are restrictions
of course, and strict documentation will be required, but
we will gladly walk you through the finer details of this
process. Be sure to mention this option when you're filling
out an application with us.
Q. May I use funds from my IRA for my down payment?
Yes. First-time home buyers can use funds from an IRA
under certain circumstances for a down payment. The
rules regarding this option, however, can be complicated,
especially with a Roth IRA, and it's important to understand
any and all tax implications before tapping into these accounts.
Please talk to your tax professional before making any
decisions. If you don't have one, we'll gladly refer you
to one we work with on a regular basis.
Q. May I use the $8,000 tax credit as my down payment?
No. At the time of the writing of this article, qualified
first-time home buyers do not have direct access to the $8,000
credit to use as a down payment. In May, HUD officials made an
announcement to the contrary, but statements backing the announcement
were quickly withdrawn from the HUD website. This doesn't mean that
HUD and lawmakers will not allow this in the future. We're following
this issue closely and will let you know if anything changes.
Just keep reading our newsletters and other materials we send to you
or give us a call and we'll let you know if any progress has been made.
