You’ve heard the news—interest rates are at historic lows. That’s great news, but when other expenses like rent and utilities are increasing, it makes it hard to save for a down payment. You’re not alone in this challenge—access to a down payment still remains the number one obstacle for homebuyers.
Down payment programs largely untapped
Down payment assistance can make a significant impact to your home buying bottom line, and it’s never been truer than in today’s market. According to our latest Homeownership Program Index, there are nearly 2,500 homeownership programs available across the country (find out what’s in your backyard here). Yet, many homebuyers are unaware of the programs that are available to them.
In fact, a survey by NeighborWorks America found that 40 percent of respondents did not receive any information about down payment programs for middle-income homebuyers.
How do these programs help you? We review the top six ways you (and the housing market) can benefit:
1. Helps you purchase a home sooner. Many buyers remain on the sidelines, saving money and watching interest rates. Down payment programs may provide grants (gifts) or forgivable loans for your down payment and closing costs. These resources can immediately build your buying power, helping you take action on a purchase more quickly.
2. Allows you to take advantage of today’s low interest rates. Even with lower interest rates and home prices, the entry cost of buying a home may be out of reach. Homebuyer programs provide access to down payment funds to help more families take advantage of these record low interest rates now.
3. Helps offset FHA premiums and mortgage insurance. Over the years, FHA has been the primary place for many first-time homebuyers to get a low-cost, low down payment loan. However, these affordable loans also include premiums (loan fees) and mortgage insurance to manage the risk on the loan. You may not know that your FHA loans can be combined with a down payment assistance program, helping offset the costs of premiums and mortgage insurance.
4. Helps community service employees live close to their job. Many community service employees, such as police officers, firefighters and teachers, can’t afford to purchase a home in the community where they work, especially in high-cost areas. There are several targeted down payment programs that can help provide funds for a down payment, helping keep valuable employees in the community as well as reduce commuter costs.
5. Gives you an important cash cushion. In the National Association of REALTORS® 2015 Profile of Home Buyers and Sellers, 81 percent of first-time homebuyers used savings to fund their down payment. And, only two percent used any type of program or assistance, even with billions of dollars available in programs across the country. Don’t become “house poor”—leaving the closing table with little savings and reserve funds for home maintenance and other unexpected emergencies. Down payment assistance helps you with the upfront cash for the down payment so you can plan for other homeownership expenses.
6. Provides valuable homeownership education. In order to qualify for a homeownership program, you are likely required to complete a homeownership education course. This course typically covers the logistics and steps of buying a home as well as financing basics, homeownership responsibilities and contract obligations. This valuable, upfront education helps you prepare for the home buying process and sets you up for long-term homeownership success. Plus, our research shows that approximately 50 percent of programs now accept online homeownership education, making it easier for you to complete on your own time.
Ready to find out what programs may be a fit for you? Check out our program search to get started.