Closing Costs And Down Payments: How Prospective Homeowners Find Help

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If only buying a home was as easy as opening a newspaper, scanning through the homes for sale listings and choosing the one that fits perfectly. There is just so much for homebuyers to learn about, inspect, and do before any home can be moved into. Many people are not even certain they will ever be able to be homeowners because of the huge initial cost just to get into a home. Luckily, there are ways to make this part of the process much easier.

Save as Much as Possible

Even if people are not able to save 20 percent of the purchase price for a down payment, having some money in a saving account will improve their chances of receiving a loan approval. Save money by creating a budget that categorizes all spending by needs and wants. Learning to identify the difference and finding ways to cut the "wants" category by as much as possible will usually free up a substantial amount of money.

Accept a Generous Gift

Most lending companies will accept a down payment paid by a third party. They will also require this third party to write a letter documenting the money as a gift. This is to ensure that there is not an agreement between the buyer and gift-giver for the money to be repaid or that the money has not been raised through some sort of illicit activity. Not everyone is able to get this type of money, but parents and grandparents often enjoy passing out an inheritance in this manner. Some couples even choose to forgo the parent-funded wedding celebration in favor of this type of gift instead. Just make certain everyone is aware of the extra paperwork and tax obligations first. 

Find the Right Program

There are several government-run programs that assist homebuyers by reducing down payments, eliminating closing costs and lowering interest rates. Some are for veterans, some for low-income homebuyers, and others are for first-time buyers. Many, like USDA loans, have surprisingly few requirements to qualify, aside from proof of adequate income and a fair credit rating. The HUD Good Neighbor Next Door Program can even reduce the cost of a home by 50 percent. 

Negotiate with the Seller

Home buyers who have the credit, income, and down payment necessary to buy a home may still be financially strained to pay their closing costs. The solution is to have the seller pay for the closing costs for the buyer. Not all sellers will say yes, and it typically means the buyers agree to pay the asking full price of the home or a little extra. Considering that closing costs can be as much as 5 percent of the cost of the loan, it is usually worth the sacrifice.

Whenever it is possible to make a large down payment on a home loan, it should be done. By doing so, the borrower is often able to get a much better interest rate and avoid a PMI payment. The PMI is a mortgage insurance that is tacked on to the monthly payment until the home has attained a certain amount of equity. Even though it may seem unattainable at first, many people are able to achieve their dream of home ownership. There are many programs and tips that everyone can use to finally become a homeowner. 

For a real estate agent, contact a business such as Central Virginia Realty.