How To Secure a Good Down Payment
Different real estate experts offer their own unique opinions on how much an interested homeowner should spend on a down payment.
Different real estate experts offer their own unique opinions on how much an interested homeowner should spend on a down payment. But all of them agree that paying a considerable amount of money up front is the optimal way to pay for a home. By paying a large sum of down payment, a customer not only has a better chance of buying the home of their dreams, but also in securing a favorable mortgage loan.
Not everyone has the money in their savings account to make the type of down payment experts recommend, however. In order to pay that large down payment, an interested homeowner needs a strategy for raising the money they need. There are ways to collect the funds needed through a variety of savings plans and programs. Choosing the right one can be all the difference for a customer securing the proper funds to make the down payment on the property they would like to buy.
Improving the credit score is key
In order to work with a down payment assistance program, on the federal or state level, a homeowner has to meet specific qualifications. According to Realtor.com, the payment programs are meant for people who otherwise may not have enough funds for the house they desire. This may be a person or couple working low-income jobs or otherwise not bringing in enough money every month to pay a substantial mortgage. Or it could be someone who makes more money, but also needs a higher amount to pay for the home they'd like to buy.
Regardless of a potential homebuyers monthly income, an applicant to the down payment program must have a good credit score. Paying off existing debt of all types, from student loans to credit card payments, will improve a person's credit score. This lets lenders know that the borrower is trustworthy and capable of paying back the loan in a reasonable time frame.
First-time homebuyers may have to take extra steps to secure money for a down payment. Some programs require those buying property for the first time to fill out extra forms or take seminars so they have a stronger understanding of what the process entails.
Borrowing from those you know
Instead of raising money through a government or private program, a strategy many interested homebuyers take is acquiring funds on their own. From dipping into their 401(k) or savings accounts to borrowing money from a friend or family member, there are other ways to collect the capital needed to make a large down payment.
As U.S. News & World Report stated, these gifts must be documented so both parties are aware of how much was borrowed and what the terms are for paying the money back. It's important to note that a gift exceeding $13,000 per person or $26,000 per couple is subject to taxes.