No Down Payment? No Problem!

We’ve all worked with buyers like this.  They have a good job.  They cover their bills easily.  They’re stable and ready to buy a home.  HOWEVER – they can’t seem to save up the down payment. 

Even with conventional financing needing

as little as 3% and FHA as little as 3.5%,

some buyers don't buy because they have no money to put down.

 

Well fear not!  Help is on the way.  Thanks to Indiana Housing and Community Development Authority’s Next Home program, many buyers don’t need a down payment. 

WHY I LOVE THIS PROGRAM

• 4% assistance –buyers using this program gets 4% of the home’s price in down payment assistance.  This covers all of the 3.5% down payment while leaving a touch more to go toward closing costs.
• Many qualify – the bar to qualify is within reach for many buyers.  The biggest hurdle is an income limit.  A two person household in St. Joseph County can’t have an annual household income of more than $59,400.  If there are 3+ members in the household, it jumps to $68,310 (current limits, can change at any time).  If they make less than this per year though, they’re good.
• Not limited to first time buyers – gotta love this one.  Even if your client has owned a home before or owns one now that they are selling, they can still use this program.   
• No delay  – If your buyer uses this program, it doesn’t slow the process down like some other 100% options do.  USDA offers 100% financing but the state is so backed up that you need 60 days to close one.  Not so with IHCDA - Next Home closes in the regular 30-45 days.

WHAT I COULD LIVE WITHOUT

• FHA loans only – this program has to be used with FHA financing.  If you read my posts regularly, you might remember one from June where I broke up with FHA (FHA - I'm Dumping You).  I’m not a huge FHA fan right now.  That being said, it does the job and might well be worth it for the right buyer.
• Higher Interest rate – the interest rate for Next Home is higher than the regular FHA interest rate.  It varies day to day, but on average it seems to run about 0.5% higher.  On a $100,000 price home, that would work out to about $30 more that the buyer pays each month.  They would get $4,000 in down payment assistance though, so the extra $30 per month might well be worth it.
• Points Charged – this program charges 2 points upfront.  This can be covered with seller concessions but that means we’re likely asking for 5-6% in concessions instead of the usual 3-4%.  That also means that the lower priced home (<$70,000) might still need some buyer investment seeing 6% in concessions likely wouldn’t cover the existing closing costs/prepaid items and these 2 additional points.

BOTTOM LINE

If your buyer is ready to buy a home but is unable or unwilling to wait until they can save a 3%-3.5% down payment, Next Home might fix their problem.  To learn more about it, check out my educational video (YouTube Video) or give me a call (574-234-5201).