Ways to get into a new home without more money

Home Mortgage Affordability, A gray house, brown card and calcul

Home buyers are feeling the pinch with home prices going up and interest rates increasing. So what is the best way to keep your payment down? One option is to save money for your down payment but that takes time. And the more time it takes, the more chances that your home price will be higher yet. So what can you do?

With interest rates increasing it has had a big impact on home buyers. Mortgage rates went from around 3% to closer to 6% in less than six months. Depending on the price range you are looking at, that can increase your monthly payment easily by $300-500/month! That can definitely affect how much you can qualify for. So what are some options to help keep payments down?

One option many are considering is some type of down payment assistance. There are many programs across the country. In Minnesota, one of the biggest programs is MN Housing. They offer down payment assistance and they also have programs for move up buyers. The income limits and interest rates will vary depending on your income, but it may be an option to put more money down. Maybe you can use the assistance towards your closing costs or maybe it will help you get to 20% down with money you have saved up. There are different programs in different cities and counties. Talk to your loan officer or do some research to see if there is a program that might help you to get into a home easier.

Gift money may be an option. Do you have a family member that is willing to give you a gift to help with your down payment and closing costs? Maybe you have some of your own money but could use help with a larger down payment. Or maybe you have enough money for a down payment but not the closing costs. Check with your parents to see if they may be able to help you with a gift. It may be enough to cover your closing costs or lower your mortgage insurance payment.

Do you have enough money for your down payment but not closing costs? In the past it was much more common to ask the sellers to contribute towards your closing costs. In some cases you may be able to get the seller to contribute some money towards your costs. It truly depends on the market in your area and if you are in multiple offers on the home you want to buy. It may be an option to help you get into a home sooner.

There are some programs that may help you buy a  home with less down. If you are a teacher, police, firefighter or emergency medical tech, you may be able to qualify for a program called Good Neighbor Next Door through HUD. The issue with the program is that the home must be in a revitalization area and that may not be an area you want to live in. It is worth checking into in case there is another program that might work too.

For those buying a home that you plan to be in for a shorter time period – maybe 5-7 years, an adjustable rate mortgage may be something to look at. There are some ARM’s with lower rates for the first five to ten years. That lower rate could definitely help you in the beginning. Just know that after the introductory period, your interest rate will increase.

Make sure your credit report is clean. The higher your credit score, the lower your interest rate. If you have less than 20% down, the higher your credit score, the lower the mortgage insurance too! Look through your credit report and make sure there aren’t any errors on it. Errors on credit reports can be very common, so make sure you look at your report every year. Your credit score can affect more than just your mortgage rate- it can affect insurance rates too.

Rising mortgage rates can make it harder to buy a home but that doesn’t mean it’s impossible. Rates are still lower than average, but we have been spoiled the past couple of years!! When you are ready to buy, reach out and we can look at your situation and what works best for you!

Leslie Vanderwerf,  NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website


Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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