For many people, it is the American dream to own a home. In today’s economic times it is not always easy to save money for your dream home. Luckily, there are many ways to go about getting a home with a lower payment. If you are looking for ways to reduce your down payment and closing costs on a new home then this article is perfect for you.
The great news is that you can get a lower down payment by qualifying for an FHA loan. When getting a home mortgage the typical down payment is over 8% of the total home loan. This could mean that you would be asked to put down $16,000 on a home costing $200,000. You would not be reading this article if you had that type of money available.
This is where a Federal Housing Authority (FHA) loan comes into place. The FHA places insurance on the loan. This allows you to put a lower down payment on the home. This down payment is 3.5%. This means on the same $200,000 home you would now only owe a $7000. This is much more reasonable. It is imperative that you speak with someone to see if this option is available to you.
Now, what about closing costs? The closing cost is the way that all parties involved end up getting paid for their services. The closing costs are typically paid by the buyer of the home. As with the down payment, they are based on the amount of the home loan.
One way to help with the closing cost is to ask the seller to pay it. You as a buyer may think this is a great idea. If you stop to think about the seller’s perspective, it may not seem like a good deal for them. So why would they do it?
Typically, when they seller agrees to pay the closing cost, they negotiate the price of the home. So say the home you have an offer on now is selling for $200,000. When a seller agrees to pay the closing, they will negotiate the price of the home to $205,000. This assumes a $5,000 closing cost.
You do not save money in the long run by doing this. However, it will help you get into the home of your dreams as you will need less money up front.
Written by Monte Mohr, a realtor that specializes in Franklin subdivision Ashton Park.
Categories: Real Estate Advice for Buyers