Alternatives to Down Payment

If you don’t have a down payment to buy a home, there may be other options available to you. Lenders offer an unprecedented range of loans with 100 percent (or sometimes more) financing options with very attractive rates and flexible credit and income guidelines. Thanks to these programs, the need to come up with a hefty down payment is no longer such an issue. Still, even 100 percent financing requires some financial commitment on the part of the borrower, like covering closing costs, the cost of an appraisal, and a home inspection.
Home buyers can also use ‘‘gift’’ money for down payments—something that was not allowed just a few years ago. While some lenders may view this attempt to help (by, say, a parent) as a signal of the borrower’s indebtedness, it is becoming a more acceptable way of obtaining the funds necessary to obtain a loan. Lenders have different guidelines for accepting gift funds of less than 20 percent of the home’s purchase price, so inquire before taking this route.
If coming up with a down payment is a sticky point for you, a mortgage broker or lender can point you in the right direction, particularly if you fall into one of these categories:
❑ You have a strong source of income, but not much savings.
❑ You prefer to keep your assets in higher-yielding investments.
❑ You have low-to-moderate income and minimal cash reserves.
❑ You are a first-time home buyer with high rent costs that eat up
much of your cash.
❑ You are a move-up home buyer with minimal cash reserves.