Gone are the days that you don’t need to put down a single penny to get a mortgage in Arizona or anywhere else in America. Zero-down home loans are generally extinct. Although most lenders don’t demand unreasonable down payment requirements for conventional mortgages, paying less than 20% of the property’s cost up front comes with disadvantages.
A low down payment naturally makes it harder for you to build equity on your property over time. Putting down less money means borrowing more, and the more you loan, the higher the mortgage interest rate in Tempe you’d pay over time. Lastly, not paying at least 20% down payment requires you to include private mortgage insurance to protect your lender from financial losses in case you default.
Most borrowers rely on personal savings to come up with a down payment with fewer to no repercussions. However, you might count years, not months, to set aside enough funds to pay the ideal amount.
Fortunately, there are other ways to source extra funds. Here are some of them:
After yourself, the next people that could help you produce an adequate down payment are your friends and relatives. Many lenders allow cash gifts provided that the giver would attest that it’s not a personal loan. Also, there must be proof, like a bank statement, showing that the money indeed came from the person you claim it’s came from.
Homeownership Assistance Programs
Some companies provide grants to assist employees buy properties. Many private organizations use them to attract top talent, and persuade them to relocate. Ask your HR department to determine whether your employer could take part in your home-buying endeavor.
If you need more cash to buy the property you want, consider liquidating some of your other assets, like investments. Take a hard look at your investment portfolio, including your 401k retirement savings plan, to determine where you should get the remaining funds you need for your mortgage down payment. Study the market with the foresight to avoid selling assets that might yield a high return down the road.
Saving for a down payment is perhaps the hardest part of mortgage application. If you play your cards right, you can maximize alternative sources of funds to speed up the process without compromising your principles.