I see time and again advertisements on the internet for no down payment first time homebuyer loans. The down payment is typically in the form of a grant that does not need to be paid back. Many people push these loans enticing first time homebuyers to buy a home without any money out of their pocket. While these loans increase sales for the loan officer and real estate agent, are they really in the best interests of the first-time homebuyer?
The simple answer is no. The type of loan a first-time homebuyer can obtain is much better if they can put a small down payment, as little as 1%-3.5% of the sales price. This down payment can be a gift and does not have to come from the buyer. No money down loans, known as down payment assistance loans, typically have higher interest rates, higher fees, and restrictions on when you can refinance or pay off the loan. None of these features are in the interests of a first-time homebuyer.
If you are looking to purchase your first home, contact us and we can help you plan for a loan with a small down payment that can save you thousands of dollars over a no money down loan.
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