If you’re ready to buy a house but struggling to come up with a 20% down payment, don’t give up. There are many programs out there to help first-time home buyers into a home of their own. In fact, a lower down payment can be beneficial.
Becoming a Homeowner Sooner
When you’re ready for a mortgage, every rent payment can feel like a waste of your buying potential. Instead, understand that you may need to pay private mortgage insurance (PMI) for a time once you purchase your house. As the home appreciates and you make payments, PMI will drop off. In addition, if you can buy a home that needs updating, you may be able to refinance the remaining balance in a short time and get your loan under 80% valuation mark, again removing the need for PMI.
Having More Liquid Assets
Having a lower down payment doesn’t mean that you shouldn’t have savings in place before you purchase. According to this source, spending less on a down payment allows people to retain money that can then be put into a rainy day fund or be used for inevitable home repairs. It’s possible to find a home that needs updating or cosmetic repairs. Be sure to get the home inspected to make sure that the repairs are within your price range or your skillset if you plan to do them yourself. Contact a contractor to thoroughly check out the house before you buy. Sometimes, the money you pay an inspector to help you walk away from the wrong house is the best investment you can make.
Giving Yourself Time
If you buy a home that needs updating or repairing, be sure to allow enough time. You may be excited to get to the repairs immediately. However, family commitments and work all need their focus as well. Break the project down into manageable chunks. If you need to replace carpet but don’t have time to address this before you move in, consider installing carpet tiles in some spaces so you can replace flooring by the square foot. Understand that your repair budget will need careful management to avoid depleting your savings.
Home ownership is one of the best ways to build equity and increase your personal wealth over the course of your life. Finding the right home is critical as is starting early. Check out programs to help first-time home buyers get into a home of their own.
Not sure if you’re ready to buy your first house? We recommend checking out this article next!