Low Down Payment Loan Programs

CalHFA Dream Program is gone.

This program brought a ton of new potential homebuyers to the market and some got to take advantage of it. 

There is a bigger story here.  I’ve talked to a ton of people who think that a program like this is the only path to homeownership.  That is simply not true.  There are a ton of different ways to become a homeowner, and it may be easier and closer than you think.

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I’m going to lay out two different options that we often see our first time home buyers take advantage of.  Also, these aren’t JUST for first timers, you can use these programs more than once…

Number 1 – Most Popular – 5% Down Payment, Conventional Loan

This is a loan program that ANYONE can take advantage of.  It is pretty simple, as it explains itself with its name.  This is a mortgage that you’re taking out with out putting 5% of the sale price as down payment. 

Example:  $750,000 Price x 5% Down Payment = $37,500 Total Down payment

– Closing costs in CA are roughly 2% of the sale price, so you’ll need to add that to your Down Payment to get your “Cash To Close”

Example: $750,000 Price x 2% Closing Costs = $15,000

Cash to Close = The total amount of money you’ll need to bring to the table to close on the house. 

Here is a hack if you’re working with a good agent.  You can actually negotiate that the seller pays a part (or all) of your closing costs as the buyer.  This means that you can buy the home with much less money out of pocket

This means that you could buy this home with $52,500 total cash out of pocket. 

Yes, when you put less than 20% Down Payment you will have “Private Mortgage Insurance” or PMI.  This is an insurance policy that the bank takes out to ensure they make their money back.  You pay a monthly fee that is included in your mortgage

Number 2 – New Favorite – 3.5% Down Payment FHA

Again, this is as it sounds.  Only 3.5% down payment to buy a home.  FHA stands for the Federal Housing Administration, and their goal is to make home ownership easier.  One of the biggest upsides to an FHA loan is that they’re more flexible than a conventional loan.  You can qualify for lower rates, even with lower credit scores. 

This program works like any other mortgage. With recent changes, we will see this become a much more popular option. 

I mentioned one of several ways that we save our clients money, should our next blog be on the top 5 ways?  Reply to this & let us know!