Many homebuyers, particularly those purchasing for the first time, fall for several myths about downpayments. As a result, they delay a home purchase longer than necessary.
They often believe, for instance, that they need a 20 percent downpayment – an amount it would take them 12.5 years to save, on average, for a median-priced home. In reality, they have access to lower-downpayment products from the FHA, Department of Veterans Affairs, Department of Agriculture, Fannie Mae and Freddie Mac.
Although some lenders recommend at least 20 percent down, buyers need to take into account the other costs of homeownership – such as repairs, moving expenses and appliance purchases – before determining whether it makes sense to sacrifice so much of their savings.
Meanwhile, some buyers mistakenly believe that sellers will not accept an offer if a portion of the downpayment comes from a gift or homeownership program. However, experts say buyers need to only document everything to give the sellers peace of mind. Homeownership-program buyers actually have a bargaining chip against rival bidders if the program covers closing costs and other seller-paid costs.
Finally, buyers might believe that it’s more difficult to get financed for downpayment programs, but they actually have approval processes similar to ones for a first mortgage. However, buyers would be wise to start the approval process prior to finding their dream home.
Source: Housing Wire (08/07/15) Chrane, Rob