You are getting ready to purchase the dream house you have been coveting for many years but end up stumbling over an issue that befalls every first-time house buyer: down payment.
There are three ways to acquire a house – cash, installment, or mortgage loan. The first option is for the uber-rich: people with enough “pocket money” to burn that they won’t even feel that a considerable amount of their investment was spent on buying a property. The second option is for the average income earners: people with enough savings to splurge on a worthwhile investment like buying a house or taking an insurance policy. Lastly, the third option is for the greater majority of people: these are individuals like you who do not have the cash on hand necessary to pay for the property in full but have just enough money in the bank so that lenders can see them as low-risk borrowers.
If you can pay for your house either in cash or by installment then you are lucky. However, if you take on a mortgage loan then things may not be as easy as you think they are.
One hurdle to jump over is your down payment. You may have enough savings in the bank but if you take into account the amount of your initial payment, and then notice that little fund is left afterward to get you through the next month, then you are in trouble.
What you need is a special form of assistance that will ensure that you can buy the house!
Our topic for today is all about financial assistance programs and grants that first-time house buyers can take advantage of so that their plans of buying a property will push through.
Let’s break ground right away…
Down Payment Assistance Defined
In its simplest, most understandable meaning, down payment assistance is a form of financial aid to help you cope with your initial payment. This is offered either by government agencies or by private non-profit organizations to support a first-time home buyer with poor credit like you.
Remember that being classified as one with poor credit will never mean the individual – YOU – are not capable of purchasing a house. This just tells lenders that the borrower has other obligations to settle aside from the mortgage loan taken but is in no way meant to indicate an inability to pay the required monthly amortization.
Types of Down Payment Assistance Plans
There are several DPA plans available for first-time house buyers and are listed as follows:
a. Grants – this is probably the BEST among the DPA plans available. The reason is obvious:
you are not required to repay the amount. Grants are normally donations from various sectors of the community whose aim is to help fund a much-needed project and support an individual who is in dire financial condition. Consider this as “free money” for you to use.
b. Forgivable Loans – these are DPA plans that allow borrowers to be forgiven in repaying the loan. These loans are tagged at 0% and lenders will permit non-payment of this financial aid provided that the borrower remains at his residential location for at least 5 years. The length of forgiveness has its limitations, though: lenders may, at their behest, require repayment of the loan if the term goes beyond 5 years.
c. Deferred-Payment Loans – these DPA plans work only if the first-time house buyer is eyeing a second mortgage against the property. Similar in fashion to forgivable loans but with a slight twist, these plans are likewise tagged at 0% and are non-demandable by lenders for repayment provided, however, that the amount of the second mortgage taken can cover the down payment until you re-negotiate your property or pay in full your first mortgage.
(NOTE: These are not forgivable loans; hence, you are required to repay your lenders should you decide to forego ownership of your house. The proceeds will then be used to pay up your outstanding balance.)
d. Low-Interest Loans – these are DPA plans that are similar to deferred-payment loans but you are paying two mortgage loans in the process. The second mortgage is used to cover your down payment while the primary mortgage is used to pay for your house; hence, you pay twice every month. The objective behind this is to get a lower interest rate to make them easier for you to settle without burning a big hole in your pocket.
(NOTE: If you are lucky, you may even find a lender who will approve your second mortgage and apply a 0% interest rate against it. We suggest researching for the best mortgage lender for poor credit to take full advantage of this offer.)
e. Matched Savings Programs – these are DPA plans where the individual will be required to open an account with a bank and make a deposit (this doesn’t carry any minimum deposit amount because this account is a “special deposit plan” created for first-time house buyers will little funds to cover their down payment requisite.) The bank (or any government agency or private institutions or non-profit organization that the bank is working with) will then deposit an amount equal to the money deposited beforehand. Hence, the amount is now doubled in value (i.e., initial deposit=$5,000.00 plus bank add-on=$5,000.00 equals $10,000.00) and can be used by the house buyer to secure the down payment. You may as well treat this as your one–of–a–kind special private money home loans benefit.
First-time house buyers face hurdles most especially when securing a mortgage loan but do not have sufficient funding for paying their down payment. Several down payment assistant plans are available to make things lighter and more affordable for the money-strapped future home owner.
Among these DPA plans, grants are the best for you because (1) they are donations from various sectors, and (2) you are not required to repay the amount garnered.
However, if you require guidance then do not hesitate to contact a professional mortgage advisor like Dominion Lending Oshawa Canada. They, along with their expertise in the realty estate business and staple of reliable credit advisory services, can provide you the best results for financing your brand new house.
Be diligent and do extensive research regarding your choice of a mortgage professional to avoid potential problems in the future.
Dominion Lending Oshawa is your best mortgage solutions provider in Canada. Founded by Faizal Garasia in 2019, we have a network of more than 90 lenders including the largest banks, credit unions, trust firms, and financial institutions across the country.
Contact us at (416) 825 0142 or send an email to [email protected] today to learn more.