To start, even if you already have your down payment, if you can keep that money in the bank working for you, it may make more sense to NOT use it as a down payment. On a short term investment (planned to own less than 5 years), it may actually be wiser to leave your money in the bank and use a Not-For-Profit Program to buy your home.
Now that you have your down payment resources lined up, how do you use them to maximize benefit? The most important thing to remember is that ALL lending is first and foremost, risk based. Credit, Income, Employment History etc. are all just factors used to assess your individual risk score. The higher the amount owed VS the purchase price sets the overall risk standard. So, no matter how poor your credit is, you must think of borrowing money via the concept of RISK. Paint the picture YOU want the Lender to see.
Charity Not-For-Profit :
Using our Risk basis. Lets do an example. A credit challenged buyer wants to purchase a home FSBO (For Sale Buy Owner®). Using an online Home Valuation tool (like this one), we can surmise the value of "A" home to be approximately $125K. The seller wants $97K. The buyer submits a contract offer for $125K with no seller concessions and $28K via a Not-For-Profit 501C3 donation towards down payment and closing costs. The appraisal comes back good and the contract continues. So how do the numbers work?
|The Contract Proposal||
|Seller donation to Charity||
|Donation to Buyer||
|Buyers Total Closing Cost||
|Amount of Loan @ 6% Fixed||
The amount of money out of the Buyers pocket for Lender/Closing fees was the cost of the appraisal. Depending on the Lender/Broker, if this is done correctly, you could easily buy a home without any money out of your pocket no matter what your credit score is. It would just take the "right" loan.
What do you do if the appraisal comes in lower? You negotiate your contract with the seller down to the appraised value while reducing the amount of assistance accordingly. If it doesn't make sense for your needs, you simply walk away and find a home that does.
Home Buyer Education:
Standard ARMS and Differences
DOWN PAYMENT SOLUTIONS™
Other Important Links for down payment assistance and first time home buyers:
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