If you are currently in the home-buying process, you already are aware that there are many different costs to consider. Perhaps the most daunting task is saving for the down payment and/or closing costs that you will likely incur. Before, we've talked about how you can sometimes manage to get a home with bad credit, now we'd like to address another common scenario that may arise: Decent to good credit but, very little cash in hand. Here's a few tips, tricks, and even government programs which might provide some relief for you!
The obvious first step in any home-buying situation is to ascertain just how much of a mortgage you qualify for. The most direct method to facilitate this is to simply apply for funding. You will need to provide them your income information, applicant's social security number (so they can run your credit reports), and perhaps even be prepared to provide bank statements. Once you know how much you will approve for, you will then be able to figure out just how much of a down payment you will need, as well as any potential closing costs.
If the amount of up front costs is something you are not able to manage, depending on your circumstances, you may qualify for any number of state and/or federal programs which may reduce or, even remove the requirement to provide a percentage of the purchase price as a down payment.
While your mortgage banker will be the one who can facilitate the paperwork required for any of these programs, it is important to know of the programs up front. Why? Well there's two reasons in our mind. The first is so that you will be able to let them know you are interested in going this route up front. It will save you time and heartache in the long run if you don't have to keep going back and forth shuffling documents with your banker. The second, is that bankers are often reluctant to offer these programs because they often make less money with them. If you come into the process with a basic knowledge of what you need, it will make it clear, up front, what your needs are.
So, without further ado, here's our list of programs that you might consider looking into:
IHDA: The Illinois Housing Development Authority offers down payment assistance as well as closing cost assistance to potential home-buyers who qualify. The particular program in question here is called the Access Mortgage Program. If you are in need of down-payment assistance as a first time buyer or even a repeat buyer, this program is definitely worth considering.
HUD: The federal department of Housing and Urban Development works with the State of Illinois to provide primarily first time home buyers with assistance in getting into their first home. If you are looking to stay in the city, it might be worth your time to visit the HUD website to see if there is any program that might be suitable for your situation.
FHA: The federal Housing Administration's basic program allows home-buyers in nearly any situation (with sufficient credit) to utilize their standard reduced down-payment program. This type of loan is very common and offers a broad based approval rate to those who do not quite qualify for the run-of-the-mill “conventional” loans out there.
IDHS: The Illinois Department of Human Services is even in this game, offering the Welcome Home Illinois loan which offers down-payment assistance as well as reduced interest rates on the loan itself which will not only help you in the interim but, down the road as you make your monthly payments throughout the life of the loan.
USDA: If you are not planning on staying in the city, definitely consider the USDA loan. If you have a sufficient credit score (around 640+), are able to prove you have a debt to income ratio of 40% or less, the USDA loan can get you into your new home with very little out of pocket expenses. There are other requirements but, for those moving out into rural areas, this loan program is the one for you!
As you can see, there is help, if you need it with your down payment. As with anything in life, if you have less cash in hand, there will always be more difficulty in acquiring what you need. But, as with anything else in life, it is not impossible. If you happen to know of any other programs out there, by all means drop us a line and let us know! We'll add it to our page.
December 08, 2018
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