Your First-Time Home Buyer Down Payment Options
March 27, 2013
Tips & Trends
From Rory S. Coakley on some of the latest real estate news and happenings.
For many first-time home buyers, there’s one big question looming in their minds: how am I going to afford a down payment? There are many people in the DC Metropolitan area who have good debt/income ratios and good credit, but don’t have the liquid assets available to pay for a traditional 20 percent down payment. Let the experts at Coakley Realty put your mind at ease by answering some of your questions about first-time home buyer down payment options!
What are my options if I can’t afford a down payment upfront?
If you can’t afford any down payment upfront, your options will be limited unless you qualify for a VA loan for US military veterans. However, there are many first-time home buyer down payment options that require less money up front, such as:
- FHA Loans – These loans require as little as a 3 percent down payment, but there are limitations on qualification.
- Conventional 97 – These loans are available through Fannie Mae, and they are a 3 percent down payment program.
- Local programs – Some local jurisdictions have their own programs (subject to qualification) that will allow you to either borrow or get a grant for the down payment or put as little as $500 down. Check out the available programs in:
How do FHA loans work? Can I refinance down the road to eliminate the insurance required?
An FHA loan is an insured loan that has a liberal approach to both credit scores and down payments. They are an excellent option for first-time home buyers, as they allow the most flexibility in payment. Some traits of the FHA loan include:
- Down payment as low as 3 percent.
- Down payment can come entirely from “gift funds.”
- Minimum credit score requirement of 500.
- Mortgage insurance premiums paid upfront at closing, and monthly after that.
- No prepayment penalty.
Since there are no prepayment penalties on FHA loans, you can refinance your loan whenever it makes sense—you don’t have to wait 10 years. You can refinance into a conventional loan, as long as it doesn’t exceed 80 percent of the lender’s appraised value. That means you will no longer be required to pay the FHA’s mortgage insurance. Additionally, if you’re not ready to refinance, the insurance will drop off once you reach a certain amount of equity in your home (generally around 22 percent). There are new rules that are set to take effect later this year that may alter the automatic mortgage insurance drop-off.
Where can I find more information about first-time home buyer down payment options and programs?
When you have questions about being a first-time home buyer, a simple Google search just isn’t enough—you need to talk to a professional real estate company that knows your area inside and out. The professional, expert real estate agents at Coakley Realty can answer any questions you have about being a first-time home buyer and how to make your home buying process simple. Contact us today to learn more about buying a home in Maryland, Northern Virginia, and Washington, DC.
If you would like to suggest a topic for inclusion in one of our future email newsletters, contact us today! We look forward to hearing from you.
Rory S. Coakley
Coakley Realty, Inc.
20 Courthouse Square, Suite 106
Rockville, MD 20850
FIND THE PROPERTY YOU NEED.PROPERTY SEARCH
CONTACT US TODAY
Featured Real Estate Listings
Residential 223 W Montgomery Ave,
Rockville, MD 20850
This home, also known as the Old Episcopal Rectory, was built in 1875 with six additions to follow over the years. This six bedroom, two and one half bath home is privately situated on a premium 17,900 sf lot which also includes a two car garage and a Summer Kitchen.VIEW LISTING
Residential 23400 Woodfield Rd,
Gaithersburg, MD 20882
Mitchell & Best Home on gorgeous 2+ acre lot in Watkins Preserve - a subdision offering 5 additional lots! 5,700 SF (3,934 fin above grade) incl. 4 bdrms, 3.5 baths, 2 car gar, & a full W/O bsmt. 1st fl features office, formal liv& dining rms, gourmet kitchen w/ cntr island, brkfast area & lg family rm w/ FP. Enjoy the gorgeous sunset views from the spacious deck!VIEW LISTING
Residential 1021 17th St NE #2,
Washington, DC 20002
GORGEOUS 2+ acre lot in heart of Potomac. At the end of prestigious Riverwood Drive, this lot is on a cul de sac. Public water & sewer & gas available. Enjoy all that Potomac has to offer: Potomac Village features shops, restaurants, supermarkets, Starbucks and more! Outdoor enthusiasts will love Swains Lock & Great Falls Park. Country Clubs, equestrian facilities,& sought after schools nearby. Other units available.VIEW LISTING