Down Payment Answers For The First-Time Home Buyer

First-time home buyer fully know the biggest obstacles to having keys in hand are financial. 

Without equity from the sale of a previous home, the millennial generation has a particularly difficult time with down payments. One reason: their early adult years came during the financially devastating Great Recession.

Statistics from the National Association of Realtors find that 87% of first-time home buyers believe they need a 10% minimum down payment.

The reality is that the average down payment for a first-time buyer is about 6% — and often less. Better yet, there are a number of programs for the first-time home buyer that require no down payment at all.

First Steps

Even while searching for down payment options, a buyer needs to stay focused on maintaining or repairing his or her FICO credit score. The other time-sensitive consideration is a work history that demonstrates reliability; a steady paycheck pays the mortgage.

HUD officially defines a first-time buyer as:

• An individual who has had no ownership in a principal residence during the three-year period ending on the date of purchase of the property. This includes a spouse; if either meets the above test, they are considered first-time homebuyers.
• A single parent who has only owned with a former spouse while married.
• An individual who is a displaced homemaker and has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

Varying Down Payment Assistance 

There are almost 2,500 programs available across the country for the first-time home buyer. A good real estate agent will help you find one that meets your situation. Also research employee programs and nonprofits. 

Nationally available programs include: 

FHA home loans are one of the most popular options due to the lenient requirements. The down payment required is as low as 3.5%.

VA home loans require zero down payment and are available to current or former military service members.

The U.S. Department of Agriculture (USDA) has attractive loans available that many people are not aware of, and the requirements are less stringent than people perceive.

The Good Neighbor Next Door Program by HUD. This is for law enforcement officers, pre-kindergarten through 12th-grade teachers, firefighters and EMTs who want to contribute to community revitalization by becoming homeowners.

FHA Section 203(k) loans take into consideration the value of the residence after improvements have been made. This may be a good fit if you’ve determined that a fixer-upper is best for your budget.

Contact a real estate agent or local HUD-approved housing counseling agency to learn more about programs in your area that best fit your situation. Besides low or no down payment requirements, be sure to ask about below-market interest rates, reduced closing costs, fees and programs that do not require mortgage insurance.