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What About the Down Payment?

Tips from mortgage experts on how to afford your down payment

The down payment is a chief concern among many first-time homeowners. This is especially true today, when prices are rising and low interest rates make owning a home more irresistible than ever. Don't worry; the days of 20% down being your only option are over, and there are many other options you can take advantage of to finance your down payment.  

Save as much as possible

Where there’s a will, there’s a way. “It’s amazing what someone can do when they have a goal and a focus,” says Bernie Tong, Realtor and partner with Locations. “Most do not realize where all their money is going until you sit down with them and make a list. It’s amazing how plate lunches and Starbucks can add up,” says Tong. “I have had clients pay down bills and save a down payment in sometimes as little as six months just by adjusting their spending habits."

Low/zero-down loan options

Two zero-down loans are available today and provide 100-percent financing: VA and USDA. VA loans are available to current and retired members of the armed services. USDA Loans are available for a large part of Oahu, and for all of the other Hawaiian Islands. Contact your Locations agent for more details on 100% financing.

Even if you are not a veteran, or you want a property outside the USDA-approved areas, low-down payment loans still exist. For first-time homeowners, 3% and 5% down conventional loans are available. If you are not a first timer, 5% is usually the minimum down. These programs are also more forgiving with FICO credit scores as low as 620. Even better, these 3% or 5% down payments can be gifted, in whole or in part.

Down payment gifts

Down payment funds can be a gift from a relative. That means mom or dad, even auntie or uncle. The money has to be a gift, not a loan. Check with your Locations agent or a Compass loan originator for specific terms and conditions. Parents often tap into their own home equity to come up with the gift money.  Grandparents can also be a good resource, especially if you are planning to own a place nearby and are available for future care giving.

Government programs

Check with your loan officer about Rural Development loans. For properties in designated rural areas, as defined by the U.S. Department of Agriculture, buyers may be eligible for 100 percent financing.

Ask if you qualify for the Mortgage Credit Certificate program, administered by the State of Hawaii Housing Finance and Development Corporation, which can reduce your federal income tax obligation and put more income into your pocket to help qualify for a loan.

Other possibilities

Sources of down payment funds are almost limitless. Some new homeowners have used tax refunds or end-of-the-year bonuses to supplement their cash funds. Others tapped into their retirement accounts. Sometimes it makes sense to sell one of the cars, if you can get along with one car or use the bus for a while. Some new owners have even sold personal items.  

The benefits of homeownership greatly improve your financial future. Control spending on consumer goods and keep your eye on the goal of homeownership. You won’t regret it!