Saving for a down payment can be easier than you think

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According to the National Association of Realtors, the hardest step in the home buying process is saving for a down payment. HouseLogic.com, which is NAR’s site for homeowners, recently reported that requiring a 20% down payment is “one of the biggest misconceptions in buying a home.” Misconception, misconception. Saving for a down payment is not so difficult to achieve.

Let’s start with the 20% misconception. The average down payment for first-time home buyers in 2021 was 12% of the purchase price, according to NAR. The average down payment for first-time buyers was 6%. Just over a third of all buyers purchased with an FHA loan, which requires a 3.5% down payment. Both the Veterans Administration and the USDA offer zero-rate loans, while the New Mexico Mortgage Finance Authority offers programs for low- and middle-income buyers that require a minimum cash investment of just $500.

Freddie Mac and Fannie Mae both offer products that only require 3% down payment. Keep in mind that loans are like shoes and lenders are like shoe stores. Not all shoe stores offer the same shoes and not all lenders offer the same loans. The key to being an informed shopper is to remember that even if two “stores” sell the same products, they may not offer them the same price.

In addition to saving for the down payment, buyers should also consider closing costs associated with the purchase. In our area, where the average selling price of an existing home is around $260,000, buyers can expect to pay a minimum of around $4,000 to $5,000 for loan and installation costs. assessment, home insurance and other related costs.

Gary Sandler

So, now that we know that homes can be purchased with much less than 20% down payment, the next task is to figure out where to find the money.

I jokingly tell people that the New Mexico Lottery could fund their down payment and closing costs and maybe even the whole house, albeit at quite long odds. A better route would be to raise donation funds from friends, family members or employers. Some non-profit organizations offer down payment assistance. Borrowing from retirement accounts is another alternative, but be sure to ask about any penalties you may incur in connection with the withdrawal. Your tax refund, if you’re lucky enough to receive one, may also do the trick.

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You can also consider crowdfunding sites, such as Kickstarter, GoFundMe, and Indiegogo, to get your house buying quest started. Lenders will want to know the names of your individual contributors if the money was deposited into your checking or savings account just before applying for a loan, so it’s best to complete the funding process and transfer the funds at least two months before your departure. ready to buy. By the time you are ready to sign on the dotted line, the funds will be “seasoned” and no longer subject to verification.

Another method to reduce the amount of upfront money is to ask the seller to pay your closing costs, which would reduce or eliminate the money needed to complete the purchase. Keep in mind that there is no free lunch. You could have bought the property for a lot less if you hadn’t asked for the concession. Instead, you fund a lot more in exchange for lower out-of-pocket fees.

And finally, you can sell some of your assets. Depending on how many hobbies you’ve had and then given up over the years, you could be one garage sale away from living on Easy Street.

Meet at closing time.

Gary Sandler is a full-time realtor and president of Gary Sandler Inc., real estate agents in Las Cruces. He loves answering questions and can be reached at 575-642-2292 or [email protected]

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