If you're reading this, you're probably excited to get into a home, but the down payment is getting harder and harder to save, or you'd prefer to hang onto the cash, rather than spend it all in one place (or house).

The fact that home prices spiked in value over 2020-2022 doesn't help either.

I'm going to show several options where it's possible to get into your next home without fronting any cash.

Here are the options

  • Local down payment assistance programs

  • Lender down payment assistance programs

  • VA or USDA loans

Local Down Payment Assistance Programs

Your City, County, or State may provide funds to help you buy your next home.

These funds come in the form of either

  • Grants

  • Loans

With grants, you typically qualify if you are a first time homebuyer and if you don't make too much money. Grants don't require repayment.

With loans, there are 3 types

  • Repayable

  • Deferred

  • Forgivable

With repayable loans, the down payment assistance comes with a monthly payment, an interest rate, and a term. Some programs require repayment over 10 years, others will go up to 30 years.

With deferred loans, they don't charge any interest, they don't require any monthly payments, the loans are only due when you sell or refinance the house.

With forgivable loans, if you stay in the home for a specific timeframe, the program will forgive the amount. That timeframe can vary, from 3-10 years depending on the state and program.

These Programs Require Approved Lenders

To access these programs, you need to speak with the right lender that has access.

It's also helpful to work with a real estate agent that knows the logistics as well.

I help connect hopeful buyers to the right professionals, so if you're looking to buy a home and would like to see if you'd qualify for a local down payment assistance program, fill out this form, and I'll work on it.

If you'd like to chat and get a brief consultation before I connect you, just put in the notes "could I have a consultation first?" and we can chat before jumping into talking with a lender and agent.

Lender Down Payment Assistance Programs

A lot of lenders have their own form of down payment assistance. These aren't dependent on local programs, but are offered at a national level.

The most common are repayable loans at a 10 year term, but there are a handful of lenders that have access to grants.

Apart from that, I know of several programs that will offer $0 down mortgages for first time homebuyers. But these programs usually require a higher minimum credit score.

Again, filling out this form will help me connect you with the right people.

VA and USDA Loans

If you've served in the military you may be eligible for a VA loan, which does not require a down payment at all. You finance 100% of the purchase price.

For those who haven't served in the military, there is a USDA mortgage that does not require a down payment. The program is meant to help develop areas with a smaller population, so you have to buy in a rural area.

USDA loans also put a cap on how much money you can make. So if you make too much money, you won't qualify.

What About Closing Costs?

As a homebuyer, you not only have to worry about the down payment, you have to worry about closing costs.

Here are some options to get the closing costs covered:

  • Have the seller cover your costs

  • Have the local program cover the costs

  • Swap a higher appraised value for seller credits

Have the Seller Cover Your Costs

Depending on the market you're in, you might be able to get away with asking the seller to cover your closing costs.

When I say "depending on the market" here's what I mean

  • Are houses are sitting for sale, but not selling?

  • Are houses on the market are cutting their prices?

  • Are builders offering credits toward closing costs as an incentive?

Those are signs of a "buyer's market" which would come in your favor. In your offer on the home, write in "seller to cover $_ in buyer closing costs" and see if they accept it.

Have the Local Program Cover Your Costs

If your down payment is only $5,000 and the local program is offering $10,000 then you can sometimes use the remaining $5,000 to put toward your closing costs.

Swap a Higher Appraised Value For Seller Credits

If you're in the process of buying a home, and the appraiser suggests that the home's value is $5,000 more than what you're buying it for, you may be able to swap that higher value for a seller credit.

Here's how:

  • Write an addendum increasing the purchase price by $5,000

  • On the same addendum ask for a credit of $5,000

This way the seller still nets about the same amount, and you pay $5,000 less in closing costs.

This will increase your monthly payment, because your loan amount will increase. But if you're willing to swap a higher payment for lower upfront costs, then this is a way to do it.

Talk to Someone First

If you'd like to speak to someone about down payment assistance options, and if you'd qualify, please schedule a time to talk to me. I can help walk you through what programs might be a good fit.

What I do is free to you, because if I end up passing you to one of the expert local agents, they'll pay me a referral fee. But if we determine we can't find a fit, then we don't worry about it.

Here's where you can schedule a time to chat with me.

Either way, I'm rooting for you!

Sam

About the Author:
Samuel Thompson is a licensed real estate agent, a licensed mortgage loan officer, has been in finance for over 15 years, and is dedicated to providing first time homebuyers with all of the information and education needed to take that next step.