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The Scoop on Down Payments

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The Scoop on Down Payments and Closing Costs

Most people are surprised to learn how little cash it actually takes to buy a home. Nowadays there are some aggressive mortgage loans available that really reduce your "upfront" cash needed. Once you have a workable plan about the amount of cash you need, everything else will fall into place.

Kay, don't you need a large down payment?
Not necessarily. The amount of upfront cash needed to buy a home is approximately 8% of the price of the home, if you pay all the down payment and closing costs yourself. However, there are many ways to reduce upfront costs and cash out of pocket.

The down payment is 5%, and the closing cost fees amount to approximately 3%. Together they total about 8% of the sale price of the home.

For example, to buy a $100,000 house, you would need approximately 8%, or $8,000 to pay the down payment and other costs to get a mortgage loan.

Is there a way we can reduce that amount?
Yes. There are several ways you can get some of your upfront costs covered for you. Let's deal with the down payment first; in the example above, that would amount to 5% of the purchase price, or $5,000. Here is one option: someone or several people could actually give you money toward your down payment, say your parents or some other significant person. There are some guidelines you must follow, however:

  • This "gift" must be TRULY a gift; it cannot be a loan. Any donation to you must be free. A written statement from the person giving you the money must be presented, stating that it is a gift free and clear. This is called a "gift letter."
  • You are required to supply only 20% of your down payment from your own savings. In the example we used earlier, that would be only $1,000 you have to come up with. The other $4,000 can be gifts from a significant friend or relative.
Click here to order our FREE Triad NC Home Buyer's Primer!

But what about the other 3% in closing?
There are several options available for you to help with some or all of the closing costs.

Ask the seller to pay $3,000 to closing for you. This would be specified in the offer to purchase. Your offer should tell all upfront. Here's how you do it. Say the house is priced at $105,000. Rather than offering $104,000 or $103,000, etc., offer the seller full price ($105,000), or even up to $107,000 - and ask the seller to pay $3,000 to closing for you. The seller realizes the same sale price either way.

Most new home builders offer to pay $2000 or so toward closing without your even asking!

What if the seller will not agree to that?
There are several other types of financing that will help with some of your closing costs. Order my FREE Triad NC Home Buyer's Primer - Your Personal Guide to Get the Home You Want, and discover other helpful ways of lowering your cost.

"I never thought we would be able to own a home. But Kay's knowledge of creative financing proved us wrong! I wish we had talked to her years ago."
- Tim & Janet

A new loan program has been recently introduced that requires NO down payment. This is the first regular conventional loan ever available requiring no money down. The loan applies to a house of almost any price, and it's available to anyone with good credit and a stable income.

To learn more about this exciting program, please feel free to write to me or call me with any questions you have. Don't miss out on this great opportunity!

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Kay Hunkins - Consultant,
HomeBuyer Coach & Appraiser

Burlington, Greensboro & Triad area, NC
336-686-2177   Toll-free: 1-888-315-7284
Fax: (Toll-free) 1-877-273-2689
Websites: www.khunkins.com

E-Mail: Kay@khunkins.com