Down payment funding alternatives

For many buyers, especially first-time buyers, saving the funds for the down payment can seem an insurmountable hurdle to home ownership. This doesn’t have to be the case. As your mortgage broker, I can help you find creative ways to come up with your down payment.

Using a gift for your down payment
One way to fund a down payment is by using a gift. For many loan programs, a gift may be used for a portion or all of the required down payment. Money given as a gift for a down payment can’t come from anyone. Family members are the usual source.  Sometimes an employer may also be an  acceptable source. If this is an option open to you, please let me know.  I will determine which loan programs accept gift funds for down payments. I will also supply the gift letter that the donor of funds is required to sign. The gift letter states that the funds are a gift and will not be paid back.

Down payment assistance charities

If a willing and able family member is not available, buyers now have the option of turning to a non-profit for down payment assistance.  Caution should be taken when searching for a down payment assistance charity (aka down payment assistance program).  There are many reputable organizations providing buyer assistance, but there are dubious ones as well.  You may want to research the charity with the Home Gift Providers Association (HGPA) (http://www.downpaymentalliance.org/) before making a commitment.

Generally, a down payment assistance charity will give the buyer money for a down payment that does not have to be repaid.  The seller will contribute an equal sum to the charity at closing or soon after.  The seller will also pay an administration fee to the charity.  Sounds good, right? 

This can be a good option for buyers who don’t have other means of securing a down payment.  However, you should be aware that this method of funding the down payment may inflate the selling price of the house.  You’ll want to consult with your real estate professional about how such a program may affect the selling price.

Zero down mortgage loans

There are many lenders now that offer 100% financing for a home purchase.  Let me help you find the down payment and mortgage alternative that’s right for you.  100% financing is usually less expensive than using a charity gift, and is almost always less expensive that continuing to rent.