Are you dreaming of homeownership but worried about the hefty down payment? Fortunately, there are various options available that allow you to purchase a home without the traditional 20% down payment. Here are five alternatives to make your homeownership dreams a reality with less upfront money and not breaking the bank.
FHA (Federal Housing Administration) Loans
FHA loans are an excellent choice for first-time homebuyers specifically and those with limited down payment funds. They require as little as 3.5% down payment. These loans are insured by the government, making them less risky for lenders, and they often come with competitive interest rates. Although most lenders can approve you there are still common guidelines required to fit into the FHA option. See the link here that can tell you the minimum requirements: https://www.hud.gov/buying/loans You can use this to see if you qualify now or as a goal to get there!
USDA (United States Department of Agriculture) Loans
If you're considering a home in a rural or suburban area, USDA loans could be your ticket to homeownership. Which Virginia is majority in this category! These loans require no down payment and offer competitive interest rates. They are designed to help low to moderate-income families achieve their homeownership goals. Click here to read about the eligibility requirements and common answered questions: https://www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-guaranteed-loan-program
State Programs
Many states offer specialized homeownership programs that provide down payment assistance, grants, or low-interest loans. These programs vary from state to state, so check with your local housing authority to see what's available in your area. These programs can significantly reduce your upfront costs. Here is a list of VA specific state programs you can look into:
Homeownership Assistant Programs Through HUD:
https://www.hud.gov/states/virginia/homeownership/buyingprgms
Homeownership Down Payment Assissitant Program:
https://www.dhcd.virginia.gov/dpa
Virginia Individual Development Accounts:
https://www.dhcd.virginia.gov/vida
Downpayment Assistance Grant:
https://www.virginiahousing.com/homebuyers/down-payment-assistance-grant
Closing Cost Assistant Grant:
https://www.virginiahousing.com/homebuyers/~/link.aspx_id=EA2E3F871B4748AEBEB470E25DEC4CFC&_z=z
Gift Money
Sometimes, generous family members or friends are willing to provide financial assistance to help you with your down payment. Gift money can be a great way to cover your upfront costs without the need for personal savings. If you find that this can be an option for you please ensure you are keeping up to date with your lender, so they can tell you the correct way about depositing it into your account. As depositing and withdrawing large chunks of money through the buying process can stall approval.
Seller Subsidy
In some cases, sellers may be willing to help you cover your costs through a seller subsidy, also known as a seller concession. This is where the seller agrees to pay a portion of your closing costs from their proceeds to help close the deal. Which can include the down payment. I would try not to rely on this because a lot can affect the outcome such as market conditions, the seller themselves, listing price, etc. If you think this can be a good option for you, speak with your realtor so they can plan accordingly and talk through it with you.
In conclusion, you don't have to be discouraged by the idea of saving up a 20% down payment to buy a home. There are several alternatives available, including FHA loans, USDA loans, state programs, gift money, and seller subsidies, that can help make your dream of homeownership a reality. Explore these options, speak to a qualified mortgage advisor, and find the best path to secure your new home.
