Info For Buyer's

A buyer's primer

Downpayment assistance:
There’s lots of help for buyers

In any economy, one of the best investments has always been real estate. You just can’t beat the value of your own chunk of land and a nice house to go on it. But for many potential buyers, the problem is coming up with a downpayment to make this defining purchase. The fact is that very few homebuyers have the cash available to buy a home outright. Most of us will rely on a financial institution for a mortgage, but buyers still need to raise the cash for a downpayment.

The downpayment is that portion of the purchase price you furnish yourself. The balance is your mortgage. The amount of your downpayment (which represents your financial stake, or the equity in your new home) should be determined well before you start house hunting, but in basic terms, the larger the downpayment, the less your home costs in the long run.

No matter which type of mortgage you choose, in most cases you’ll still need to come up with a downpayment of at least 5%, plus some amount on closing costs.

Programs to help
The good news is that options abound for those who want to own a home, but who might be strapped for cash when it comes to the downpayment. One is the Texas Cares program, which provides downpayment assistance gift funds up to 6% to qualified homebuyers who purchase homes using an eligible loan program, such as a Federal Housing Administration-insured (FHA) loan.

Brought to Texans by the Texas Association of REALTORS® Housing Opportunity Foundation, Texas Cares not only assists buyers with the downpayment, it asks the seller to contribute to a charitable organization that’s committed to ensuring affordable housing for all. Now that’s housing with a conscience. For more information, visit www.TexasCaresProgram.org.

Believe it or not, it’s also possible to buy a home with nothing down. Here are several methods that help eligible homebuyers minimize – or even eliminate – the dreaded downpayment. They include VA loans; owner financing; house trading; job-related federal programs; and state and local government programs

VA loans
Active and retired members of the military service, veterans, and the un-remarried widows of prisoners of war and those missing in action can buy homes with little or no money down under VA programs. All branches of the service including the Coast Guard are eligible. And members of Selected Reserves or National Guard who have completed six years may also be eligible, along with many with World War II servicemen from the merchant marines, military academies and others pulled into service for the war effort. Contact the VA for more information.

Owner financing and lease-purchase
If there’s a glut of unsold homes in a market, some sellers – especially those in a hurry – are more willing to help potential buyers – and more agree to finance a loan themselves. Owner financing, many times, eliminates the need for a larger downpayment.

House trading
Don’t like your house? Then trade it! Many professional investors acquire homes with no money down by trading one property for another. In some cases, they trade one large property for several smaller rental properties. Or they trade houses in different cities to acquire a vacation or retirement home.

HUD and job-related federal programs
The Office of Housing and Urban Development (HUD) offers special financing for first-time homebuyers that’s based on need and is designed to help low-income families buy their first home without significant downpayment or closing costs. And, if you happen to buy a HUD foreclosure home, a downpayment may not be required.

The federal government also has programs to help farmers and police personnel acquire homes with nothing down. For those with limited income who wish to live in rural areas, the Rural Economic and Community Development Administration offers farmers home loans with nothing down. Monthly payments may be subsidized and the interest can be as low as 1%. And, to encourage police to occupy homes in crime-targeted areas, special federal programs permit police officers to purchase homes in selected areas with nothing down. Information is available to law enforcement officers through their places of employment.

Fannie Mae (the Federal National Mortgage Association) also offers special options for first-time homebuyers, including lower cash requirements for downpayment and closing costs and reduced income requirements to qualify for a loan.

And in Texas, the Texas Department of Housing and Community Affairs offers its First Time Homebuyer program for very low to moderate income Texas families, as well as the Downpayment Assistance Program. Call 800-792-1119 for more information.

With so many options available, the dream of homeownership can become a reality for all Texans. Without the hurdle of a big downpayment, anything’s possible.




Sources: Texas Cares; Bankrate.com