October 10, 2020
Different New-Home Payment Strategies
When searching for a new home, there are two financial questions every homebuyer should ask themselves.
Can you afford the monthly payments? And how much of a down payment should you make?
Asking, and then answering, these two questions can be stressful. Especially for first-time homebuyers, navigating the budgeting process of purchasing a home can be challenging without help or informative resources. To help get you started on the right track, here are a few strategies to consider when deciding on a down payment.
- Consider all loan options.
There are a variety of loans available, all with different benefits and requirements. Available to most are FHA loans and conventional loans. FHA loans are backed by the Federal Housing Administration. Conventional loans are not government backed, but typically can have lower down payments rates. If you are a veteran or currently in the military, you may be eligible to receive VA loans backed by the Department of Veteran Affairs. These do not require a down payment.
- Talk with your Realtor about government assisted down payment programs.
In some states, grants for down payments are provided to first-time buyers who meet certain criteria. Requirements to receive these grants typically include living in a low-income bracket or having the home buyers make renovations to the house.
- Look into the potential of a retirement fund withdrawal.
This option is not always recommended, but it is still an option that can be considered for first-time home buyers. Pulling money from a retirement account, sometimes attached to a job, is an option for paying a down payment. This option should only be considered after consulting your Realtor and accountant.
- Seek advice from your family and friends.
First-time home buyers can feel isolated during the decision process. Talking with friends or family members about their experience can point you in the right direction, or at the very least help you cross off considerations from your list. Additionally, it is not uncommon for friends and family to give financial gifts during the home buying process.