Is one of your goals this year to purchase a new home in Metro Detroit? Are you unsure how much Home Down Payment you need or what down payment assistance is available?

Understanding Home Down Payments and Programs

Are you thinking about buying your first home in Metro Detroit? Gathering enough cash for all the expenses might seem overwhelming, especially the down payment. You’ve probably heard the rule: save 20% of the home’s price for the down payment. But guess what? That’s not always true.

There is no need to stress over saving 20% unless your specific loan or lender demands it. So, you might be nearer to owning your dream home than you thought.

According to The Mortgage Reports:

“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment.”

According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today, it’s only 15%. And it’s even lower for first-time homebuyers at just 8% (see graph below):

The big takeaway? You may not need to save as much as you originally thought.

Your Resources to Help You Towards Your Goal

The traditional 20% down payment is often recommended because it can help you avoid paying Private Mortgage Insurance (PMI), which protects the lender in case you default on your loan. However, it’s important to know that many lenders offer mortgages with down payments as low as 3-5% for qualified buyers. According to Down Payment Resoruce, there is also over 2,000 homebuyer assistance programs inteneded to help with the down payment.

Programs to Help First-Time Homebuyers

FHA Loans: The Federal Housing Administration (FHA) offers loans with down payments as low as 3.5% for first-time homebuyers. These loans are popular because of their lenient credit score and income requirements.
VA Loans: If you’re a veteran or active-duty service member, you may be eligible for a loan from the Department of Veterans Affairs (VA). VA loans require no down payment and no PMI.
USDA Loans: The U.S. Department of Agriculture (USDA) provides loans for homes in eligible rural areas. These loans require no down payment and offer lower interest rates.
Conventional 97 Loans: Some conventional loans, known as Conventional 97 loans, allow for down payments as low as 3%. These loans are backed by Fannie Mae or Freddie Mac and have more stringent credit requirements than FHA loans.
Down Payment Assistance Programs: Many state and local governments offer down payment assistance programs for first-time homebuyers. These programs can provide grants or low-interest loans to help cover down payment and closing costs.
HomeReady and Home Possible: Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs are designed for low-to-moderate-income homebuyers and allow for down payments as low as 3%. They also offer flexible funding options and reduced mortgage insurance premiums.

Tips for First-Time Homebuyers in Metro Detroit

Budget Wisely: Determine how much you can realistically afford to pay for a down payment without straining your finances.
Improve Your Credit Score: A higher credit score can help you qualify for better loan terms and lower down payment requirements.
Explore All Options: Research various loan programs and down payment assistance options available in your area.
Consult with a Mortgage Lender: A lender can help you understand your options and guide you through the mortgage application process.

Final Thoughts

In summary, the journey to homeownership in Metro Detroit is filled with opportunities for first-time homebuyers to find a financial path that suits their needs. By exploring the variety of available programs and assistance options, the dream of owning a home can become a reality without the pressure of a 20% down payment. Home prices are expected to keep appreciating over the next 5 years – meaning your future home will likely go up in price the longer you wait. If you can use these resources to buy now, that future price growth will help you build equity rather than cost you more.

Mortgage Calculator and Home Affordability Tool

Find out what you can afford in your new home in Metro Detroit, and your monthly mortgage payment. Also, add in your yearly homeowner’s insurance divided by 12 months. The most important is your taxes. Don’t go by what the current seller is paying. Your taxes will be higher overall. Call the municipality you want to move to get their current tax millage rate. Suppose it is 30 mills, and you will purchase a 350,000 home.

Calculation Formula

Take the price of the home and divide by 2 = $175,000. 30 mils x $175,000, move your decimal over, and your taxes will be approximately $5,250 per year divided by 12. So, you add the principle ~ Interest ~ PMI (your lender can give you a ballpark) ~Insurance ~ Taxes, which will equal your monthly payment. I recommend knowing your numbers before you even start looking at homes. Your tax rate also will influence whether you stay on a budget regarding your monthly mortgage payment.