To keep your down payment affordable, consider one or more of these strategies:
1. Down payment assistance.
Did you know that thousands of DPA programs exist, created for the sole purpose of making it easier to buy a house? Down payment assistance is typically offered locally and may come in the form of a loan or grant that doesn’t have to be paid back. If you qualify for a grant, that money may be eligible to be used for closing costs too.
✅ Your Academy Loan Officer can let you know which local programs are available. Note that Veterans and Active-Duty servicemembers may qualify for specialty down payment assistance programs in some states.
Another opportunity to save: While the Mortgage Credit Certificate (MCC) doesn’t reduce your down payment, it’s a dollar‐for‐dollar tax credit that’s stackable with down payment assistance.
Using the MCC, you could claim a tax credit of up to $2,000 a year for a portion of your paid mortgage interest, helping to decrease federal taxes owed and increase your refund. The MCC is ideal for lower-income buyers: Ask your local Academy Loan Officer if you’re eligible.
2. Low/no down payment loans.
VA, FHA, and USDA Loans, as well as some Conventional Loans, can lower your down payment to anywhere between 0 to 3.5 percent. This is far below the oft-referenced 20 percent. The exact percentage will depend on the loan you qualify for and, in some cases, your credit.
✅ Academy Mortgage has multiple loan programs that require no down payment or down payments as low as 3.5 percent. These loan products also allow gift funds from family.
3. Gift funds.
Whether it’s college graduation gift money or funds from the passing of a distant relative, that cash can be invested in a down payment. Loved ones who want to help you save up for a house can gift up to $17,000 without taking a tax hit. Your Loan Officer will require a gift letter from the giver, disclosing where the gifted funds came from.
4. Tax refund.
You can also put your tax refund toward your home purchase. Currently, the average tax refund is around $3,000. Depending on the loan program you choose, your refund could cover a significant portion of your down payment. If you use a no down payment loan, these funds could go toward closing costs.
Crowdfunding isn’t just for a start-up or small business. It can be used to help you save up for a new house too. Feather The Nest is one option that’s similar to a gift registry and strongly targeted toward engaged couples and newlyweds. While there is a 5 percent transaction fee per gift, some users report being able to crowdfund almost all of their down payment.
6. Work on your credit.
While improving your credit won’t directly lower your down payment, it could help lower your monthly housing expense. If you’re using a Conventional Loan, you’ll be required to pay monthly Private Mortgage Insurance (PMI) when putting less than 20 percent down. The cost of PMI can depend on credit health; it may significantly increase with average or below-average credit scores in the 600s.
✅ Your Academy Loan Officer can tell you how much your score needs to improve, if at all, to make you eligible for a more competitive monthly PMI premium. Boosting your credit score may also help lower your mortgage rate and monthly payment.