Dispelling Common Home Buying Myths: Affording a Home

Many first-time home buyers believe they must have 20% of the home’s purchase price as a down payment. However, the truth is far more encouraging:

• FHA loans require as little as 3.5% down for borrowers with a credit score of 580 or higher.
• Conventional loans allow 3% down for first-time buyers, and only 5% down for others.

For example, a 3.5% down payment on a $300,000 home is just $10,500. The right loan—FHA or Conventional—depends on your complete financial picture.

FHA loans also offer greater flexibility, including higher debt-to-income allowances, leniency with past credit issues, the ability to use gift funds for down payments and closing costs, and co-borrower flexibility. Don’t let the myth of needing 20% down hold you back from becoming a homeowner.

Gift funds and assistance are allowed under most loan programs, especially FHA. Acceptable sources for down payment gifts include:

• Family members
• Employers or labor unions
• Close friends

Sources that cannot contribute to your down payment include the seller or anyone with a financial interest in the transaction (e.g., your real estate agent).

However, sellers can contribute up to 6% of the sales price toward your closing costs. In some cases, your real estate agent may also contribute to your closing costs—just not toward your down payment. Speak with us to learn how to structure your funding sources.

Many people assume renting is more affordable. While rent may seem cheaper month-to-month, that isn’t always the case—especially in markets where rents are rising.

• When you rent, 100% of your payment goes to your landlord. You build no equity.
• When you buy, your mortgage payments build equity over time as you pay down principal and your home’s value appreciates.

Homeownership includes expenses like property taxes, homeowners insurance, and maintenance. However, the long-term financial benefits—especially growing equity and price appreciation—often outweigh the costs of renting, particularly if you plan to stay in the home for 4–5 years or more. We can help you calculate your personal break-even point.

With FHA 203(k) rehabilitation loans, you can finance both the purchase price of the home and the cost of renovations—all in one mortgage.

Two FHA 203(k) Options:

• Standard 203(k): For major renovations (minimum $5,000). Covers structural repairs, room additions, and major systems.
• Limited 203(k): For minor, non-structural repairs (up to $35,000). Covers appliance upgrades, window replacements, and painting.

This loan type is ideal for first-time home buyers looking to invest in an affordable home that needs work. You can finance the improvements and make the home your own—without paying out-of-pocket upfront.