Have you ever dreamed of owning a home but felt discouraged by the thought of a hefty down payment? You’re not alone. For many Americans, saving for a down payment can be a significant hurdle. Fortunately, there’s good news! Down payment assistance programs (DPA programs) can help bridge the gap and make homeownership a reality.

We aim to bring more attention to DPA programs and the positive effect they have on home affordability, especially for first-generation and first-time homebuyers. Down Payment Assistance programs have never been more crucial. By increasing awareness among both buyers and real estate professionals, we can empower more people to achieve the dream of homeownership.

TL;DR - Key Takeaways

• Down payment assistance programs (DPAs) exist to help you buy a home. These programs can provide financial support for your down payment and closing costs.

• You don’t need a large down payment to buy a home. There are loan options with low or even no down payment requirements, and DPAs can further assist with this.
• Closing costs can be significant. Understanding these costs is crucial when budgeting for your home purchase.
• There are different types of DPAs. Grants, forgivable loans, low-interest loans, and deferred-payment loans are available options.
• Eligibility for DPAs is broader than you might think. Many programs are open to a variety of individuals, not just first-time homebuyers.
• Taking action is key. Research available DPA programs, get pre-approved for a mortgage, and work with a knowledgeable lender to guide you through the process.

What Are Down Payment Assistance Programs?

DPA programs are financial tools designed to ease the burden of down payments and closing costs for qualified homebuyers. These programs come in various forms, including grants, forgivable loans, and low-interest loans. They can significantly reduce the upfront costs associated with buying a home, making homeownership more accessible and affordable.

What Do Down Payment Assistance Programs Pay For?

Despite the general name of “down payment” assistance programs, many assistance programs allow funds to be used toward a down payment or closing costs, or both!

Down Payment:

Though there are several common loan programs with 0% down payment required for eligible buyers, generally the lowest down payment options you will find require 3-5% of the home purchase price to pay upfront on your loan.

Closing Costs:

Not as widely discussed as down payment, but equally as important is closing costs. This group of fees and expenses can potentially end up higher than your down payment amount (especially if using a low or no down payment option). Closing costs are fees and expenses, ranging from 2-6% of the loan amount that are also due at closing with the down payment.

They will cover services and taxes such as appraisals, title insurance, taxes, origination fees, etc. For example, if your home loan is $250,000, you might pay between $6,000 (2%) to $18,000 (6%) in closing fees especially if you live in an area with higher local taxes.

Pro TIP: Closing costs can also be a negotiation factor with the home seller/builder, real estate agents or your lender. You may not need a DPA program to help with these – let’s chat about this if you have more questions on closing costs.

Benefits of Down Payment Assistance:

• Reduced Upfront Costs:

  DPA programs can free up your savings, allowing you to focus on other moving expenses or future home improvements.

• Increased Buying Power:

  With DPA assistance, you could qualify for a higher loan amount, opening up more home-buying options.

• Greater Affordability:

  DPA programs can make monthly mortgage payments more manageable.

• Accessible for Various Buyers:

  DPA programs cater to a variety of individuals, including first-time homebuyers, people with disabilities, veterans, and low-to-moderate-income families.

• Promotes Stable Communities:

  By helping more people achieve homeownership, DPA programs contribute to building stronger communities.

Types of Down Payment Assistance Programs:

There are numerous DPA programs available to fit different buyers’ needs. Here are a few common types:

1. Grants:

   A homebuyer grant is a type of DPA program that provides a one-time cash sum applied directly to reduce the amount needed for down payment on the loan. The best part is – they don’t have to be repaid.

2. Forgivable Loans:

   These function like second mortgages but are forgiven if you meet specific requirements like paying your mortgage on time every month and staying in the home for a specific period (typically from 3-10 years). The loan is forgiven in increments until it’s completely forgiven at the end of the period. If you decide to move before then, you’ll need to pay back the funds that have yet to be forgiven. If you adhere to the requirements, you won’t have to pay the loan back at all!

3. Low-Interest Loans:

   These loans are similar to second mortgages but with a lower interest rate than your primary mortgage. You’ll repay the low-interest loan along with paying monthly payments for the first mortgage, typically over a few years.

4. Deferred-Payment Loans:

   You don’t typically pay interest on these loans, but you’ll eventually need to repay them when you sell the house or refinance the mortgage.

5. Individual Development Accounts (IDAs):

   These matched savings accounts require participants to save money and receive matching funds from a government agency or community organization.

Who Offers Down Payment Assistance Programs?

There are thousands of down payment assistance programs nationwide. Programs may be offered by your state, county, and city government agencies, non-profit organizations, or even individual mortgage lenders. They can take the form of grants, loans, or a combination of both. The terms and conditions of these programs are all very different, but the ultimate goal is to make home-buying more accessible for more people by removing barriers or adding incentives.

The Department of Housing and Urban Development (HUD) has a list of local home buying programs by state. Check with your city and county to see if they offer any grants or loan programs. Your loan officer can also help you to find the right DPA program for you!

What Are the Eligibility Requirements?

Qualifying for a DPA program might be easier than you think – don’t rule yourself out! Eligibility requirements vary by program, but here are some common factors:

• Property Location:

Some programs prioritize buyers in specific areas, like rural communities or Metropolitan Statistical Areas (MSAs).

• Cash Reserves:

Programs might require a minimum or maximum amount of savings.

• Homebuyer Education:

Many programs require completion of a homebuyer education course. These courses can be done in person or virtually and provide valuable information about the home buying process, financial management, and homeownership responsibilities.

• Occupancy Requirements:

These programs are typically for primary residences, not investment properties or second homes.

• Income:

Programs often help those with incomes below or within certain area median income levels.

• First-Time Homebuyer Status:

Often the term “first-time homebuyer” will refer to someone who has not owned a home within the last 3 years. Check with each DPA program to understand their requirements.

• First-Generation Homebuyers: 

Some programs target first-generation homebuyers, who are less likely to be able to rely on assistance from family. 

• Individuals with Disabilities: 

There are a variety of down payment assistance options available to borrowers who have a disability or a family member living with them that has a disability.

• Service Professions:

Veterans, teachers, firefighters, and other community heroes may have access to specific programs.

• Credit Score:

While some programs allow for lower credit scores, many still require a minimum credit score.

Misconceptions About Down Payment Assistance:

One of the biggest misconceptions about DPAs is that they’re only for first-time homebuyers. Not true!  Did you know that you can qualify as a “first-time” home buyer even if you’ve owned a house before? You are considered eligible to apply for first-time home buyer loans and benefits if you haven’t owned your principal residence in the last three to five years. So, if you owned a home in the past but are renting now, don’t just count yourself out, just make sure to check how your target program defines the term.

Nearly 40% of all programs are open to repeat buyers who have owned a home within the past three years or longer.

The Steps to Getting Down Payment Assistance:

The steps to access a DPA program typically involve:

1. Pre-approval: Connect with a mortgage lender to help you understand how much loan you qualify for and how much assistance you may need.
2. Research and Apply for Assistance: Your loan officer will help discuss your eligibility factors and find DPA programs that you could qualify for.
3. Homebuyer Education: Most programs require completion of a short online or in-person homebuyer education course.
4. Approval and Assistance: If approved, you’ll receive details about the program and the assistance you qualify for.
5. Purchase Your Home: Work closely with your lender and realtor to ensure a smooth transaction.
6. Comply with Program Requirements: Maintain eligibility by meeting program requirements, such as occupying the home as your primary residence for a set period.

Still Unsure?

Even if you’re unsure if you would qualify for a DPA program, don’t hesitate to reach out to your loan officer. This will give you a clearer picture of your affordability and potential loan amount. Your loan officer can assess your situation and explore all your options, including DPA programs, gift funds, and other strategies to tackle down payment or closing cost challenges.

Your loan officer will be happy to help you narrow down the programs you may be eligible for and help you navigate the process.

Remember, homeownership is a dream within reach for many!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. 

Dreaming of shedding years off your mortgage and saving a ton on interest? You’re not alone. From millennials and Gen Z to those who are preparing to retire, many homeowners are prioritizing early mortgage payoff. Here we’ll explore powerful techniques to pay off a mortgage early like biweekly payments, lump sum payments, and even the potential of mortgage refinance. We’ll answer all your burning questions, like “Is it really better to pay off my mortgage early or invest?” Let’s unveil the best ways to pay off your mortgage early and help you craft a personalized plan for financial freedom.

Why Pay Down your Mortgage Faster?

Now that you’re a homeowner, you aren’t paying your landlord’s mortgage and instead you’re building equity in your own place. Now picture yourself with that same home and free from a monthly mortgage payment, with the financial freedom to invest, travel, retire, or just breathe a little easier. That’s the magic of early payoff.

What are some advantages to paying off your mortgage early?

• Save Money on Interest: The longer it takes to pay off a loan, the more interest is paid over that time. Early payoff can mean tens or even hundreds of thousands saved in the long run (depending on loan size).
• Fast-Track to Financial Freedom: Being mortgage-free means a significant chunk of your income is freed up. Depending on your investment strategy, this could allow you to invest more aggressively, save additional money for retirement sooner, or simply enjoy a more comfortable lifestyle.
• Tap Into your Home Equity: A larger dent in your mortgage balance increases your equity. Your home’s equity can be a valuable resource for unexpected expenses or home improvements.
• Peace of Mind, Priceless: There’s a priceless serenity that comes with knowing your home is truly yours, with no monthly payment hanging over your head.

What is the Best Way to Pay Off Your Mortgage Early?

There’s no one-size-fits-all approach to early mortgage payoff. The ideal strategy depends on your financial situation, risk tolerance, and long-term goals. Consider these factors when creating your plan:

• Current Financial Situation: Analyze your income, expenses, and existing debt to determine how much extra you can comfortably allocate towards your mortgage.
• Risk Tolerance: Are you comfortable with a potentially tighter budget in exchange for faster payoff?
• Long-Term Goals: Do you prioritize early financial freedom or are there other financial goals you want to focus on?

Once you’ve considered these factors, you can choose the strategies that best suit you.

Understanding Principal Vs. Interest

Before we delve into specific strategies, let’s solidify the role of interest vs principal in your mortgage payment. This is key to maximizing your payoff efforts.

• Interest: The fee you pay for borrowing money (expressed as APR).
• Principal: This is the actual amount of money you borrowed for your mortgage to purchase the home.
• Amortization: The calculation of how your loan is paid down over a specific amount of time when regular payments are made.

Note: There are other costs added to your total monthly mortgage payment (local property taxes, homeowners insurance, HOA fees, etc.), but we’re only discussing principal and interest right now.

Every monthly payment is divided between interest and principal. In the early years of your loan, a larger chunk goes towards interest, with a smaller amount chipping away at your principal balance.

Example: For simplicity, let’s imagine your monthly Principal and Interest (P&I) payment is $1,000. Every loan is amortized over time, meaning monthly payments are split between principal and interest, reducing the loan balance over the span of your loan term. In the beginning, maybe $700 goes to interest and only $300 reduces your loan amount. The next month, your overall principal is reduced by $300 and the interest is now calculated upon your new, lower balance. That’s why early payoff is so powerful – it allows you to pay down the principal faster, reducing the overall interest you pay over time.

Related: Take a look at our amortization calculator.

Strategies for Early Mortgage Payoff

Pro Tip: Before changing your payment strategy, confirm if your mortgage servicer allows extra principal payments without penalties. 

Alright, now that you’re armed with that knowledge, let’s explore some strategies to conquer your early mortgage pay-off strategy. Get ready, these may surprise you!

The Biweekly Mortgage Payment: 

One popular way that some homeowners pay down their principal more quickly is to make biweekly payments. Instead of paying one monthly payment, you pay half the payment every 2 weeks.

Here’s a simple example to show the power of a biweekly payment. Let’s say you have a home loan for $400,000 with a 7% interest rate on a 30-year mortgage. In the example below you would pay $139,850.33 less in interest over the life of the loan with biweekly mortgage payments than if you made standard monthly payments!

There are online calculators available to determine these payments, or we can talk and run the numbers for you!

How Does a Biweekly Mortgage Payment Work?

Because a year has 52 weeks, this works out to 26 biweekly payments. This essentially allows you to make 13 full payments a year instead of 12. That one extra payment really compounds over time! When you pay your principal balance down faster, there’s less money to charge interest on, which lowers the amount of overall interest paid.

Make an Additional Principal Payment

Similar to biweekly payments, you can make an extra payment towards the principal each month. Even a small amount can make a big difference over time. Let’s revisit our example: $400,000 loan at 7% interest with a 30-year loan term. If you consistently put an extra $500 towards the principal each month, you could save a significant amount of money on interest payments in the long run.

There are online calculators available to determine these payments, or we can chat and run the numbers for you!

Important! Be sure to clearly communicate to your lender that any extra payments should be applied to the principal, not interest. 

Rounding Up: Small Change, Big Impact

Don’t underestimate the power of small changes. Consider rounding up your monthly payment to the nearest hundred and applying the difference towards the principal. This might seem insignificant, but over the years, it can make a dent in your loan amount.

For example, rounding up a $1,950 payment to $2,000 translates to an extra $50 towards the principal each month. Over a 30-year loan term, that’s a total of an extra $18,000 you’ve put towards your loan principal and $18,000 less that interest has had to compound on!

Windfall Warrior: 

Tax refunds, bonuses, or unexpected financial windfalls can be powerful tools for early mortgage payoff. Instead of spending them all, consider putting all or part of that money towards a lump sum payment on your mortgage principal.

Let’s say you receive a hefty $5,000 tax refund. Putting that entire amount towards your principal can significantly decrease your loan balance, reducing your future interest payments.

More Early Payoff Strategies for the Ambitious Homeowner

Should I Refinance My Mortgage to Pay it Off Faster?

Refinancing your mortgage can be a strategic move for early payoff. It involves replacing your existing loan with a new one, typically with a shorter term (like a 15-year loan) and ideally a lower interest rate. For example, if you were to refinance and get a 2% lower interest rate, you could save thousands of dollars on interest over the life of the loan.

Another benefit of a shorter loan term: With a 15-year loan, you’ll be putting more money towards your principal balance each month. This allows you to pay off your house much faster and save on overall interest costs. While your monthly payment will increase because the loan term is shorter, it won’t double (which is a common misconception with shorter term mortgages).

Important to consider: There are closing costs associated with refinancing a mortgage. These upfront fees can be significant. Let’s discuss this to make sure the long-term savings from a lower interest rate outweigh the upfront costs of refinancing.

Purchasing with a 15-Year Fixed-Rate Mortgage Option:

If it fits well into your budget, a 15-year fixed-rate mortgage might be an option when purchasing a new home. While the monthly payments will be higher than a 30-year loan, you’ll build equity much faster and save a ton on interest in the long run. Let’s discuss your options and we can give you advice on what would be best for you with your personal budget and finances.

Related: Check out our calculator to compare 2 mortgage options!

 

Should I pay off my mortgage early or Invest?

It might not all be about “can I pay down my mortgage early?”, a better question might be “should I?”

• Cash Flow Flexibility: Putting extra money towards your mortgage might mean tightening your belt in other areas. Make sure you have a solid budget and an emergency fund saved up before diving in. Financial experts recommend 3-6 months’ worth of your expenses set aside for an emergency.
• Investment Opportunities: The money you put towards early payoff could potentially generate a higher return if invested elsewhere. However, the stock market has inherent risks, while paying off your mortgage guarantees a return in the form of saved interest. Let’s discuss this and talk with your financial advisor to discuss where your bucks will make the most bang!

Ultimately, the decision depends on your financial goals and risk tolerance, but it is important to know all of your options!

Own Your Future, One Payment at a Time

Remember, paying off your mortgage early is a marathon, not a sprint. Be patient, stay disciplined, and celebrate your milestones along the way.

Let’s talk! We can run all kinds of scenarios for you on your current and potential mortgage options. We’ll see how funds can be allocated and the long-term impact of those choices. We’d love to help you calculate your individual situation!



NFM Lending is not a Financial Advisor, Tax Advisor or Credit Repair Company. You should consult with a Financial Advisor, Tax Advisor or Credit Repair Company to learn more. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan.

Tax Day has come and gone, but while tax season isn’t on most people’s list of “favorite day of the year”, there’s a light at the end of the tunnel: your tax refund! The average refund in 2023 was $2,753, and with that kind of windfall, a tropical getaway might seem tempting. But before you jump on a plane, let’s explore how you can leverage your tax refund. A down payment for a first-time homebuyer, or long-term goals like financial freedom and building generational wealth!

Can I Use my Tax Refund for a Down Payment?

Are you dreaming of homeownership? Using your tax refund for a home purchase could lead to several advantages when owning your first home! Here are some benefits to a larger down payment on your loan:

• Lower Interest Rate: A larger down payment can qualify a first-time homebuyer for a more favorable interest rate on your mortgage.
• Smoother Pre-Approval Process: A bigger down payment strengthens your financial standing. With less “risk” for a lender to consider, this can make the pre-approval process smoother.
• Avoiding PMI: With a down payment of at least 20% of the home’s value, you will avoid private mortgage insurance (PMI), which adds to your monthly mortgage payment.
• Lower monthly payment: This one might be a no-brainer, but a larger down payment means a smaller loan amount. Smaller loan amount equals smaller monthly payment!

Related: Down-payment assistance programs can help first-time homebuyers get started and increase your down payment!

How Much do I Need for a Down Payment on my First Home?

Down payment requirements vary by the type of loan you want to have. Lower down payment doesn’t always mean a better loan program; there are multiple different factors to decide which loan program is right for you. The best mortgage for a first-time homebuyer is the loan that you’re most qualified for. That will depend on several factors, including your debt-to-income ratio, credit score, and yes…down payment.

We take all of these factors into consideration and help you strategize between your options and choose the right one to fit your current and future goals.

Mortgage Types and Minimum Down Payments

 

 

Related: Check out our mortgage calculators to do the down payment math yourself!

It’s easy to see how a first-time homebuyer can use a tax refund for a down payment and boost their homebuying strategy, but what about people that already own a home? Other than using the funds for home renovations, how can you use your refund to set yourself up for a better future?

Can I Pay Down Principal or Refi with a Tax refund?

We understand the allure of a vacation, but here’s the thing: by putting your tax refund towards your mortgage, you’re essentially doing two things at once: saving money on interest payments in the long run and building equity in your home faster.

Your tax refund may also be able to help you pay fees associated with refinancing to save you money by:

• Lowering your interest rate
• Shortening your loan term (from 30yr to 15yr) 
• Removing private mortgage insurance (PMI) that may have been required if your down payment wasn’t 20% or more of the cost of your home.

If you’ve decided to use your tax refund on your existing mortgage, there are a few ways to go about it:

1. Applying Tax Refund to Principal

A lump-sum payment directly to your principal balance shortens your loan term, builds equity, and ultimately saves you on interest. The more you pay down the principal, the more interest you save.

Keep in mind:

• Ensure the payment goes towards your principal, not just a regular payment (principal + interest). 
• Check for prepayment penalties – some mortgages have them for early large payments. Review your loan terms and talk to your lender if needed.
• Some lenders might offer “loan recasting,” which recalculates your remaining loan term with the lower principal balance, potentially reducing your monthly payments.

If you’re looking for options to lower your monthly payments specifically, refinancing might be a good fit if rates have lowered since you first bought your home.

2. Using a Tax Refund for Refinancing Fees

Refinancing your mortgage means replacing your existing loan with a new one, potentially with a lower interest rate, better terms, or you could take cash out for projects or major life changes. Here’s where your tax refund can come in handy – it can help cover the refinancing fees, including closing costs and appraisals.

Is refinancing a good option for me?

• Lower Interest Rates: Perhaps interest rates have dropped since you first took out your mortgage, offering an opportunity to save.
• Improved Credit Score: If your credit score has improved significantly since the last time you bought a home, you might qualify for a lower interest rate.
• Debt Reduction: Have you paid off other debts since buying your home? A lower debt-to-income ratio can improve your eligibility for a better interest rate.

Related: How Important is Credit Score When Buying a Home?

How much does a refinance cost?

While refinancing can save you money in the long run, there are upfront costs involved that you should consider. The Mortgage Reports estimates closing costs to range between 2-6% of your loan amount.

Here are some situations where refinancing might not be the best move for you:

• Recently Closed Loan: Many lenders and loan programs have restrictions on how soon you can refinance after taking out a new mortgage. For almost everyone, you’ll want to wait 180 days before refinancing after your most recent loan began.
• Minimal Interest Rate Drop: Aim for a rate reduction of at least 1.5-2% to make the refinancing process worthwhile compared to the cost.
• Short-Term Ownership: If you plan to sell your home soon, refinancing might not make financial sense.
• Longer Loan Term: Since a refinance is a new loan on the same property, you’ll be starting your loan term over again. A longer loan term might seem appealing for lower monthly payments, but it ultimately means paying more interest overall.

Not sure if refinancing is right for you? That’s why we’re here! Our team can do a complete cost analysis for you before you start the process, making sure you’re confident in your decision before taking the first step.

Boost Next Year’s Tax Refund

Let’s say your tax refund this year wasn’t quite enough to make a huge dent on your homeownership goals today. Don’t worry, there are still ways to optimize your tax situation for next year’s return, potentially putting more money back in your pocket to fuel your homeownership dreams.

Here are some key strategies to consider:

Tax Credits for Homeowners

• Mortgage Credit Certificates (MCCs): These state-issued tax credits can be a game-changer, allowing you to claim a portion of your annual mortgage interest as a federal tax credit, effectively lowering your monthly payments.

Reach out to us to learn more about MCCs and eligibility requirements in your area!

Homeownership Tax Deductions

• Mortgage Interest: You can typically deduct your mortgage interest payments up to a certain limit depending on your loan amount and filing status.
• Mortgage Points: If you paid upfront points to lower your interest rate, you might be able to deduct them as well, subject to specific IRS qualifications.
• Property Taxes: The property taxes you pay on your home are generally deductible. If you dedicate a specific space in your home exclusively for work purposes, you might be eligible to deduct a portion of your related expenses like utilities and internet. 
• Home Office Expenses: If you dedicate a specific space in your home exclusively for work purposes, you might be eligible to deduct a portion of your related expenses like utilities and internet.
• Find out more here: The IRS published a great resource for homeowners in 2023 regarding what you can and cannot deduct, MCC credit and other information.  

Keeping good records of your mortgage-related expenses is crucial. This includes your loan documents, receipts for points paid, and documentation of any home improvements you make.

It’s important to note that tax laws can be complex, and eligibility for deductions and credits can vary depending on your specific circumstances. Consulting with a tax professional is always recommended to ensure you’re taking advantage of all the benefits available to you and remaining compliant with federal tax law. We can help you explore these options, or get you in contact with a great Tax Advisor.

In Conclusion

By implementing these strategies and working with a trusted loan officer, you can turn your tax refund into a springboard for achieving your homeownership dreams. We’re here to guide you through every step of the journey, from maximizing your tax refund to navigating the mortgage process.

Get a no-cost pre-approval and explore down payment options for first-time homebuyers – click the Apply Now button above!

 

 

* NFM Lending is not a Financial Advisor, Tax Advisor or Credit Repair Company. You should consult with a Financial Advisor, Tax Advisor or Credit Repair Company to learn more. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The pre-approval is contingent upon no changes to financials and property approval/appraisal.

One of the biggest reasons holding people back from becoming homeowners is lack of funds, specifically to cover the cost of a down payment on a loan. Luckily, there are several assistance programs available to help people in those financial situations become homeowners by covering the required down payment. If you’re in a tight financial situation, make this the year you become a homeowner by checking out the Chenoa Fund Program.

What is the Chenoa Fund Program?

The Chenoa Fund Program assists borrowers who lack funds by helping them finance the down payment requirement of an FHA loan, which is 3.5%. It essentially combines the ease of an FHA loan with a grant or second mortgage to cover the 3.5% down payment requirement, meaning you receive could receive up to 100% financing.

There are three different options to choose from based on your income. If your income is the same or less than 115% of your area median income, you might be eligible for a different program than if your income exceeds 115%. Let one of our Mortgage Loan Originators help you determine if and for what kind of assistance you may qualify.

Like any loan option, the Chenoa Fund does have a credit requirement. You must have a minimum of 620 FICO score and all additional FHA loan criteria must be met. In some instances, a non-occupant co-borrower is allowed.

As a homebuyer, you should research and discuss with your lender all the possible loan and program options available to you. If you’re thinking an FHA loan might be right for you, talk with your lender about the Chenoa Fund Program. Being unable to fulfill a down payment requirement is no longer a reason to stall your dreams of becoming a homeowner.

For more information about this program, other loan options, or the homebuying process, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!

Proceeds from the financing can only be used for down payment. Closing costs and prepaid items are the responsibility of the borrower and must be paid by other FHA eligible sources. Please visit http://chenoafund.org/ for more information.

If you are in the market for a new home, one of the first things you should consider financially is how much of a down payment you can make. Most home buyers know that the most common mortgage loan (a Conventional loan) requires 20% down payment. This means that if you purchase a home worth $200,000, you must have $40,000 cash available, on top of the closing costs needed to purchase the home. This may deter many potential home buyers from purchasing because they only have a small amount of money saved. However, Conventional loans are only one of the many loan options available. Here are five of the most widely used mortgage loans and their down payment requirements.

FHA Loan – 3.5% Down Payment*

A Federal Housing Administration (FHA) loan is a mortgage loan that is insured by the government’s Housing and Urban Development (HUD) agency. FHA loans require a 3.5% down payment for purchases and it typically offers very competitive rates compared to rates from a conventional loan. Due to the low down payment, FHA Mortgage Insurance Premiums (MIP) are required in order to protect lenders against losses as a result from defaulted mortgages. There is an up-front premium paid at closing, and a monthly premium that is paid along with the monthly mortgage payment. FHA has several guidelines that all loans must meet, such as loan limits, allowable closing costs, and debt ratios.

VA Loan – 100% Financing**

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans help service members, veterans, and eligible surviving spouses purchase a home with a competitive interest rate, limited closing costs, no Private Mortgage Insurance (PMI) requirement, and often without a down payment (as long as the sales price doesn’t exceed the appraised value). This is because VA guarantees a portion of the loan, which allows the lender to provide favorable terms. VA loans have several guidelines that all loans must meet, such as eligibility and loan limits.

USDA Loan – No Money Down^†

A USDA loan is a mortgage loan guaranteed by the United States Department of Agriculture (USDA). With a USDA loan, home buyers can purchase a home in eligible rural locations with no down payment, and can finance up to 100% of a home’s appraised value, plus closing costs. For eligible borrowers, USDA loans often come with the lowest interest rates and program insurance premiums of all government-backed loans. USDA loans have several guidelines that all loans must meet, including property eligibility and income eligibility.

80-10-10 Loan – 10% Down Payment

Also known as a Piggyback loan, an 80-10-10 loan is a great option for home buyers who have great credit but lack capital, and wish to avoid paying PMI. The mortgage loan works by having 80% of the property value covered by a first loan, 10% of the property value covered by a second mortgage which carries higher interest rates than the first conventional mortgage, and 10% will be covered by the home buyer’s down payment. Loans that are 80% or less of the home value do not require PMI.

State Bond Programs – Specific Assistance

Several U.S. states offer state bond loan assistance programs. These bond programs aim to help first-time home buyers or buyers with low capital by providing below-market interest rates, down payment assistance, long term affordability, and/or other benefits specific to the programs. These loans have program-specific income and occupancy requirements, and limitations.

There are many more mortgage loan options available not mentioned but these are the most commonly used. If you are looking to purchase a home soon, make sure you speak with a licensed mortgage loan originator. Choosing a down payment option is a big decision and a licensed mortgage loan originator can help you find options that best fit your needs. They can also walk you through the loan process and explain to you all of the eligibility requirements for the loan you choose.

*LTV’s of up to 96.5% for FHA loans. **Veterans Affairs loans require a funding fee, which is based on various loan characteristics. †100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable.

Like any major purchase, a home purchase will require you to put down a certain percentage of the total price as a down payment. The bigger the down payment, the less you will borrow from the mortgage company or bank, and the less your payments will be. With every day expenses and current bills, it can be difficult to find money to begin saving for a down payment. By planning ahead and getting creative, you can begin to save up for a down payment for the mortgage loan that best suits your needs. Here are three ways to save for a down payment and help come up with the savings you need to land the house of your dreams.

Planning Ahead
Saving money for a down payment may take a while, so it helps to have a plan. Start by researching what kind of home you are looking to buy, and the average price of those homes in the area. Then, use an online mortgage calculator to find out what kind of down payment options are best for you, based on your price range. For example, if the homes in the neighborhood you are looking to buy average at $200,000, the standard 20% down payment will be $40,000. Remember, there are loans available with lower down payment options, such as 10% and as low as 3.5%. Talk to your Loan Originator to find out which loan option is right for you.

Once you determine your down payment goals, open a separate savings account. If you’re a first-time home buyer, you can open an investment retirement account (IRA). An IRA will accumulate interest, and first-time home buyers can withdraw up to $10,000.00 from their IRA without a penalty fee. Consult a CPA for more information. Having a separate account for your down payment savings prevents you from accidentally confusing the money with your regular spending money, and it is a good way to track your progress.

Saving money will be easier if you have goals in mind. Set realistic weekly, biweekly, or monthly savings goals, and stick to them. If your workplace offers this option, set up your direct deposit so that a portion of each paycheck automatically goes into the savings account you have set aside for your down payment.

Hold Yourself Accountable
Saving money will probably require a lifestyle change, and some habits are difficult to break. For instance, if you are used to going out to eat for lunch five days a week, it will be hard to start trying to pack a lunch every day. Set up a time a few times a month, or even once a week, to sit down and go over your expenditures from the week(s) before. Seeing when and how often you make unnecessary purchases can motivate you to make the changes you need to make. Have a close friend or significant other help hold you accountable, (if you’re buying a home together, you can do this for one another).

Providing incentives for yourself can also be a helpful tactic. Set monthly savings goals, and reward yourself at the end of the month if you meet your goals. If your goal is to save $500.00 in a month, and you reach that goal, reward yourself with a small splurge—go out to dinner with friends, or buy yourself something new. This will encourage you to meet your savings goals, and the splurge will be guilt-free, because you have already met your goal for the month.

Get Creative
Although the process of saving for a down payment may seem daunting, it doesn’t have to be a chore. There are lots of fun, creative ways to save money. One idea is to earn extra money on the side. Offer to do some odd jobs, such as babysitting, dog walking, home repairs, or housework for your friends or neighbors. If you’re crafty, open an Etsy store and sell your items online. You might be surprised by how much your woodworking, knitting, graphic design, or other skills are in demand. You can also sell clothes or household goods that you’re not using anymore on sites like Craigslis and eBay, or at your local consignment store.

Another way to get creative about saving is to turn it into a game. Have a competition with a friend or family member who is also trying to save money, and see who can save the most by a particular deadline. If you’re buying a home with your significant other, compete with one another, and see how much you can save together!

The decision to buy a home is one of the biggest financial decisions you will ever make. It is important to plan and prepare carefully. Saving money for a down payment can be difficult, but it is well worth the challenge. If you’re thinking about buying a home soon, get started by talking to one of our licensed Mortgage Loan Originators today.

Purchasing a house can be a very exciting step in a person’s life. It requires emotional and financial readiness. In addition to being committed to paying a mortgage every month with varying taxes and fees, most home buyers have to pay a down payment for a house before securing a loan. The average amount that a buyer has to put down is roughly 20% of the purchase price of the home—this depends on the loan product. Saving this much money can seem like an overwhelming feat—here are some tips for you to make this process easier:

1. Determine How Much You can Afford to Spend on a House.

Before starting the process of saving up for a home, figure out how much you are able to afford. Start by looking at your monthly income, and factor in your monthly expenses. Try using an affordable house calculator like the one on our site. Once you know how much you can spend on a house, you can determine how much you need to save for a down payment. In most cases, you will need to save between 5-20% of the sale price for the down payment, but this is based off the loan product you select. Always talk to a Loan Originator for specific down payment information.

2. Set up a Timeline

Let’s say that you have determined that you can pay $200,000 for a house and you want to save up for a 20% down payment. This means you will have to save $40,000 total. This large amount and you shouldn’t expect to save this amount in a short amount of time. You may want to give yourself at least a few years to save this amount. For instance, if you give yourself five years to save the money, you will only have to save $8,000 per year. This number is a lot easier to imagine saving as opposed to $40,000 all at once.

3. Create a Clear Budget

Decide what you can afford to put aside each month. Start by reducing luxury expenses, for example large vacations, dining out every weekend, ect. You might have a family of four and go on vacation during the summer for a week, which could cost $4,000—this could be a substantial contribution to your down payment. If you eliminate eating out one night per week, you could save around $2,600 during the year (if the meal and drinks are around $50).

Try to reduce your essential expenses. Choosing not to buy groceries isn’t a good idea—but managing how much you spend in this area will be very helpful. By reducing the amount you spend on groceries by $20 per week, you could save $1,040 in a year! If you must buy a new car, purchase a car a few thousand dollars under your original maximum price.

Come up with a number that you can comfortably save every month—if you end up with extra money to contribute to this down payment that’s even better.

4. Open up a Separate Savings Account

One of the keys to saving is separating your money from your checking account or other savings accounts. If possible, set up an automatic transfer so your money automatically goes into this account every month. Make sure it is clear to you and your partner that this money is off limits under any circumstances. If you need money for emergencies, create an emergency fund.

5. Put Tax Refunds and End of the Year Bonuses in Your Savings Account.

Whenever you get a large amount of money, try to put all of it or at least half of it into this savings account.

6. Consider Downsizing

If you are currently renting a house or apartment that is too expensive, try switching to a less pricey one when your lease is over.

Don’t be afraid to extend your timeline if necessary. If you follow these tips, you will be well on your way to saving for a down payment. Good luck!