If you’re a potential homeowner struggling to come up with the money to cover a minimum 3% down payment and closing costs there’s a loan program that could help you buy a home and build equity quickly.
It’s a 1% Down Payment Loan Program. Here’s an overview video.
The program is pretty straightforward. You contribute 1% to the down payment, the Lender contributes 2% to the down payment and the remainder of the loan balance is financed. At the close you have a 3% equity stake in the home.
That’s an attractive offer, getting 3% right from the start.
So what’s the catch?
There isn’t a “catch”, but as with all loans, there are guidelines and restrictions.
One of the restrictions to be aware of is an income limit in certain areas. This program is designed to encourage home ownership in underserved areas so it only applies in certain areas. To check the income caps in a specific location check with Freddie Mac.
For example the income cap in my neighborhood is $62,900 but there are a lot of areas where there is no income cap at all.
You should also be aware that with the 1% down payment program the interest rate runs about .125% higher than if you were putting 3% down. So is it worth it to pay a little higher rate to get 2% from the Lender? That’s a question you’ll have to answer for yourself and it will depend on a lot of different variables particular to your situation.
I will say that I wish a program like this existed when my wife and I bought our first home in 2000. I remember how stressful and difficult it was to come up with the down payment and the money for the closing costs while we were getting married, trying to pay off student loans, auto loans and a couple credit cards.
Having access to a program like this would have made getting into our first home a lot easier.
For more information contact Aaron Walker or Jay Rapson at Aaron Lending, LLC.