Buying a home can be one of the most exciting times in one’s life, but it comes with stressful challenges for first-time home buyers For many low-income Americans, it is especially difficult to start the journey to homeownership. The process takes a lot of time, energy, and money. It’s not easy to qualify for a home loan, particularly during a time when inventory is low and the interest rates are being raised.
Before you dive in, know that here at The Renter’s Best Friend, we are the best in the industry when it comes to helping first-time home buyers get the assistance they need. Click here if you’re a first time home buyer, and we’ll help you get into a home in any way we can.
Qualifying for Downpayment Assistance with a Home
If you are trying to buy a house, you are certainly aware that buying a house brings its financial difficulties. You have to come up with a down payment, closing costs, taxes, insurance, and the eventual repairs. If you have a low credit score or have a lower income, you are most likely going to be denied a mortgage loan from a bank or a private lender.
There are also drawbacks to continuing to rent long-term, as it does not build equity and often does not apply to your credit history and reports.
Rent-to-own homes may be the healthy middle ground you need to help you get to the place you need to be to qualify for a mortgage loan after the end of your lease agreement. It gives you time to build your credit score and save for a down payment while also having a portion of your rent be put into an escrow account to go toward the future purchase of the house.
However, what if you still don’t have enough for the 20% down payment when it is time to purchase the property. If you are a first-time home buyer or you have not purchased a house in the past three years, you may qualify for a down payment assistance program.
Down payment assistance are typically run by charity organizations, a local or state housing program, a non-profit, or the federal government. The assistance can come in the form of grants, loans, etc. Many programs go off of a percentage of the sale price and others cap off at a specific dollar amount.
We highly recommend you click here to see if you qualify for housing assistance– it could change the course of your homebuying experience.
These programs have strict criteria that you have to meet in order to qualify for down payment assistance:
- A credit score of 620 or higher
- A reliable income
- A balanced debt-income ratio
- A first-time home buyer or have not owned/invested in property for three years.
- Attend a class on home buying and financial literacy
- You have lived in this home for 3 to 10 years
- The home has to be in a specific area.
If you believe you fit this criterion, start researching. Go to a mortgage lender and see what you need to pre-qualify. Use this information as you start looking into down payment assistance programs in your area, whether they be from a community organization or from a local government program. Check out the HUD website to search their database. Reach out through phone or email to ask questions and if they will work with your bank or lender.
The sooner you have the home financing planned out, the easier the process will be by the time you get to the end of your lease agreement. With careful planning and effective saving, it’s possible to get the money needed to lower your down payment and open the door toward owning your own home.