First-Time Home Buying

First Time Home Buying Simplified Episode 2

By July 12, 2019March 16th, 2020No Comments
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First Time Home Buying Simplified Ep. 2

Episode 2 Downpayment Options

Hi everyone, I’m Scott DiGregorio, your mortgage guy. Today, we’re coming back to you with some more information on being a first time home buyer. Look, the biggest obstacle to most first time home buyers is the downpayment.

This is a big topic so I’m just going to try to kind of give a quick overview of it. Here are the basics of what is most important to know. 

As a first time home buyer, you could get a downpayment as little as 3 or 3.5%. This is depending on the program so it’s important to look into that specifically. There can be a lot of confusion about the sources of any downpayment.

Here’s the interesting thing, that money can be a gift. Now look, there’s eligible donors and ineligible donors. And it depends on the loan programs. But generally, your employer is an eligible donor. I don’t know about you but I’ve never worked for somebody that’s willing to give me a downpayment on a house. But if you’re blessed enough to have it, run with it. 

Also, blood relatives are generally always allowed to help with the downpayment. There’s a bit of a grey area when you go beyond family ties. In some cases, a fiance is allowed to help, in other cases, a fiance is not allowed, etc.. Even more so, sometimes close friends are allowed. It honestly, all just depends on the program you’re involved with.

To put it simply, gifts are definitely a source and an option. I’ve also found that tax refunds are often used.

So now we know what can be used for a downpayment. Now we’ll talk about what can’t be used for a downpayment. Put simply, money that can’t track. If you have a ton of money sitting in your sock drawer at home and your intention is to dump it in your account and then use that to buy a house, find another solution fast, as it will not be allowed.

Downpayment assistance is something else that’s out there and there’s a whole separate video on that. That’s a full topic in of itself. But just know there are some downpayment assistance programs that are out there. 

USDA is another program that depending on where you are that offers 100% financing. That is if you are eligible for a VA loan that offers 100% financing. 

The downpayment is less of an issue than people think. Now, in addition to the downpayment, you also have an out of pocket expense for closing cost and what we call prepaid items. This is pre-paying insurance and setting up an Escrow account. 

Closing cost and prepaid can be rolled out into the contract. Don’t worry too much about that. Just know that you could use it to get into a house from between 0 and 3.5% total out of pocket. 

You will have expenses for things like appraisals, inspections, and whatnot. Hopefully, that gets your mind working on this area. If there are any questions that you have, reach out to me. This is a big topic and there is always room to learn more about it. If there’s anything else you need, reach out to me: 239-910-6040. 

Watch the video here:

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