Buying a home is a dream for many, but it can sometimes feel like a catch-22 for first-time buyers. Many people are paying rent that’s equal to or less than what a mortgage would be but just don’t have the savings for the down payment and closing costs. This scenario is more common than you think, but there is some good news for you if this is your situation. Options are available that can make homeownership more attainable, even with limited savings!

Understanding Low and No Down Payment Loans

While a down payment is a factor with many loans, it's not as burdensome as most people think. Depending on your loan type, it can be as low as 3% down. Many first-time buyers find the closing costs to be the biggest burden. Typical closing costs on a 250k home, not including your down payment, can be around 12k. This includes pre-paid costs like your homeowner's insurance, taxes for the remainder of the year, and prepaid interest. This also includes lender origination fees, Title insurance policy, title fees, transfer tax, and other miscellaneous fees. However, don't let this deter you from your dream of home ownership; there are ways to combat these fees! There are several loan programs that can help you get into a home with little or no money down and assist with closing costs. A great realtor can also assist you in negotiating for the seller to pay some of your closing costs, which we will get more into here in a moment.

First-Time Home Buyer Loans

  1. USDA Loans: The United States Department of Agriculture offers loans for homes in eligible rural and suburban areas with zero down payment. Check the eligibility of a property here. Not only does this make buying a home more accessible, but USDA loans also allow for up to 6% seller’s assistance. This means you can negotiate with the seller to cover your closing costs, potentially reducing your out-of-pocket expenses to nearly nothing.

  2. FHA Loans: The Federal Housing Administration provides loans that require as little as 3.5% down. FHA loans also allow for up to 6% seller’s assistance to help cover closing costs, which can significantly reduce your out-of-pocket expenses.

  3. VA Loans: If you are a veteran or active-duty service member, you might be eligible for a VA loan. These loans require no down payment and have no private mortgage insurance (PMI) requirement, which helps reduce your monthly payment. VA loans also allow for up to 4% seller’s assistance, which can be used to cover closing costs.

Exploring First-Time Homebuyer Programs

Many counties in PA offer programs specifically designed to assist first-time homebuyers. These programs often provide down payment assistance, closing cost assistance, or even tax credits.

  • Beaver County First-Time Buyer Program: This program provides down payment and closing cost assistance for low and moderate-income individuals purchasing their first home in Beaver County. The assistance is available as a grant if the applicant’s income is at or below 80% of the area’s median income. For more details, visit the Beaver County First Time Buyer Program.

 

  • Butler County First-Time Homebuyer Program: This program offers matching funds for down payment and closing costs up to $5,000 for low-to-moderate-income individuals and families. The Butler County Homeownership Program also provides a range of free services, including budget counseling, credit counseling, and homeowner education classes. More information can be found on the Butler County Housing Authority website​ (Housing Authority)​​ (Housing Authority)​.

 

  • Lawrence County First-Time Homebuyer Assistance: This program provides financial assistance to first-time homebuyers to cover down payments and closing costs. It aims to support low-to-moderate-income families by reducing the initial financial burden. For more information, visit the Lawrence County Housing Opportunities website​ (Housing Opps)​.

 

These programs can significantly reduce the financial barriers to homeownership, making it more accessible for first-time buyers even if they have limited savings. It's important to explore all available options and work with a knowledgeable real estate professional who can help you navigate these programs and find the best solutions for your situation.

Negotiating Seller’s Assistance

In addition to choosing the right loan, negotiating seller’s assistance can significantly reduce your closing costs. Seller’s assistance involves asking the seller to contribute towards your closing costs, which can be a viable option depending on the market conditions and the seller’s situation.

  • Understanding Limits: Different loan programs have different limits on how much seller’s assistance you can receive. For instance, USDA and FHA loans typically allow up to 6% of the purchase price to go towards closing costs, while VA loans allow up to 4%
  • Strategic Negotiation: In a buyer’s market, where sellers are more motivated, negotiating seller’s assistance can be more straightforward. However, even in a competitive market, a skilled real estate agent can help you strategize to make a compelling case to the seller.

Seasonal and Lender-Specific Incentives

Many lenders offer special programs for first-time homebuyers, especially during the spring and summer months. These can include reduced interest rates, closing cost credits, or other financial incentives.

  • Income Limits: Be aware that these programs often come with income limits or other qualifying criteria, but they can offer substantial savings if you qualify.
  • Lender Credits: Some lenders offer credits towards your closing costs if you meet certain criteria, such as using their preferred mortgage insurance provider or bundling other financial products.

The Path to Homeownership

Homeownership is more than just having a place to call your own; it’s a significant investment in your future. Every mortgage payment builds your equity rather than paying someone else’s mortgage. While the path to buying a home with limited savings isn’t always easy, it’s definitely possible with the right approach and guidance.

As real estate professionals, we're committed to helping you navigate these options and find the best path to homeownership. Whether it’s negotiating seller’s assistance, finding the right loan program, or tapping into first-time homebuyer grants, there are many ways to make your dream of owning a home a reality.

Don’t let the lack of savings for closing costs and a down payment hold you back. Reach out, and let’s explore the possibilities together. Homeownership is within your reach, and we're here to help you every step of the way.