Home affordability is more important than ever, especially in a hyper-competitive market. You may be looking for ways to secure a smaller down payment or lower interest rate. The good news is that there are various loan options and products that can help you get into a home now rather than waiting to save for a down payment or for the market to shift. If you're a first-time homebuyer — defined by most lenders as someone who has never owned a home or has not owned a home in the last three years — or you are a borrower with a lower income, you may have even more home loan options available.
A local independent mortgage broker can help you navigate the complexities of these options to find the right fit for your financial situation. Here's a breakdown of how you may save hundreds or even thousands of dollars on your mortgage — and get into your dream home.
Saving on the down payment
You may think you should bring 20% down to the closing table, but this is far from the truth for most homebuyers. A surprising number of options are available today to help you secure a lower down payment.
Recently, lenders have rolled out 0% down payment programs. For qualified homebuyers, this means purchasing a home with no upfront down payment required. Typically, your lender will provide the required funds for your down payment through a second loan or mortgage, sometimes without interest or monthly payment requirements throughout the loan term.
Zero down payment programs are often reserved for buyers who meet specific qualifications, such as not exceeding a certain income level. To see if you qualify, connect with a local mortgage broker to help you understand loan eligibility requirements.
Government loans offer first-time homebuyers and veterans even more home loan options. If you are a first-time homebuyer looking to buy in a rural area, you may qualify for a USDA loan, allowing you to put as little as 0% down on a property. Similarly, if you or your spouse has served in the US military, you could qualify for a VA loan, making you eligible to put 0% down on your home purchase. An FHA loan, for which eligibility is typically based on your credit score, could allow you to bring as little as 3.5% down to closing.
Saving on the interest rate
Many lenders offer rate buydowns and allow you to pay upfront to secure a lower interest rate. This can lead to significant savings, as rates can sometimes be lowered by as much as 3%. Typically, these programs reinstate the original interest rate after a set number of years, allowing you and your family time to manage any expenses as you settle into your home. Some lenders even allow for seller concessions, costs that the seller agrees to pay to the buyer, to be used toward rate buydowns. If interest rates drop, you can refinance later to secure a lower interest rate beyond your buydown term.
Similarly, depending on the market, an adjustable-rate mortgage (ARM) could be another option for you, allowing the interest rate on your mortgage to adjust based on market conditions. This may be a smart choice if rates are expected to drop, or if you don't plan to stay in your home long-term. Your local independent mortgage broker can help you determine if a rate buydown or an ARM is the right home loan option for you.
Saving with waivers
An escrow waiver allows you to pay property taxes and insurance directly rather than wrapping the costs with your home loan, meaning a lower mortgage payment. This is a great choice if you prefer to manage your own cash flow. An appraisal waiver may also be an option depending on the chosen lender and property, which could not only save you a hefty appraisal fee, but also help speed up the financing process. Lenders may also allow closing costs to be financed as part of the mortgage.
Affording a home isn't too good to be true
Purchasing a home is one of life's most significant financial decisions — and educational resources around homeownership and affordability products are more crucial than ever. If you have questions about utilizing specific home loan programs, or you're uncertain about down payment assistance, it's important to recognize the extensive regulations set forth by the government and mortgage lenders today that protect homebuyers. They also ensure that lenders use criteria consistently and fairly to evaluate whether they lend to a borrower based on their proven ability to repay the loan, including FICO score, income, employment history, and other variables. These regulations and policies strictly forbid predatory or "subprime" lending practices.
Accessing home affordability products
A mortgage broker is a local home loan expert who can break down home loan options to help you save the most money and will be by your side throughout the home financing journey. They can assist you with getting an initial approval or a pre-approval letter before or while you're house hunting, which will likely increase the strength of any offers you submit for a home. Mortgage brokers are also known for their competitive pricing, speed, and elite client service — they're available when you need them, even on weekends — and they can help you close on a mortgage quickly so you can get into your new home even sooner than you may have imagined.
This post was created by Mortgage Matchup with Insider Studios.
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