When you are buying a home generally you will be required to put down 20% or more to escape mortgage insurance on a conventional loan, 5% or more to obtain traditional conventional financing with mortgage insurance. If you have less then this then you can look at an FHA loan that requires 3.5% down and a conventional home possible loan is 3%, a USDA loan for ZERO down, a VA loan with ZERO down.
The issue becomes that many people that could be served by a USDA loan from a financial standpoint live in URBAN areas where the USDA loan cannot work geographically. The VA loan also only work for veterans of the US military that earned the benefit. That means that for the majority of you reading this you will be required to put at least 3% to 3.5% down. On a 100K loan 3.5% down is $3500.00 and depending on who you are that may or may not be a lot of money. In my experience however it seems to be that if the $3500 is not a lot to you or you could handle raising it you cannot find suitable housing for 100K. When you refigure for your area your median home price x's 3.5% that number may be much higher.
As of September 2023, writing the national home price average was $412,000. So that 3.5% is $14,420.00. ok fine 3% is $12,360.00! Now you get it! So, what do you do what it's always a step out of reach? Find a gift. The gift can be from a variety of sources, like a relative such as a parent or child or, a non-relative in some cases. You need to ask your lender to make sure that the gift source you want to use is acceptable. Interested parties are not allowed to gift. The real estate agent, your lender, the seller - they cannot gift your money for the downpayment because they have an interest in the transaction, They get a commission or sales funds from the sale so they are OUT. UNLESS they are the seller are related to you, they YES, they can gift to you. Its mortgages its complicated sometimes.
Many communities have programs that can offer funds for an FHA loan and sometimes to conventional loans as well. These are referred to as grants or community second mortgages. If it's being referred to as a grant - it generally does not get paid back. If it's being referred to as a second mortgage, then the expectation would be that it would be paid back. Some grants required you to occupy the home as your primary residence for XX years or you are required to pay all back or a portion of it back. So many programs, like thousands so trying to spell it all out here is hard. Read the fine print, FREEish money is available!
How to find this money?
1. Ask your local expert - real estate agent or mortgage lender should be able to point you to it.
IF they say I DON'T know - move on to another - they are not interested in helping you.
IF they say anything else then listen - ever area is different, money can run out and in most areas funding is annual.
Sometimes you will be warned that these programs don't work, or they are a PAIN. They are or can be a pain, but they do work! The programs are subjected to federal review and a lot of behind-the-scenes audits to ensure money is going to the right people.
2. DON'T get discouraged but don't fall for any scams either. These programs will never ever ever ever ever cost you money upfront to see if you will be approved. That a RED FLAG! Asking for an appraisal to be paid for is not a red flag. That's a hard cost of a mortgage and is typically paid by upfront regardless of the outcome of the loan approval. I am talking about pay us XX amount upfront and we guarantee you XX amount. They want your bank info and drain it....
3. Look on your own and research the heck out of it use the link below to go to our search page.