Are you buying your first home, but not sure if you can afford it or where to start? You just hit an internet jackpot: this post is for you!
Here, we cover:
We also answer the ultimate first-time homebuyer question: do you really need a 20% down payment? (no, but you’ll want one.)
If you don’t see your homebuying question here, hop over to the Penny community page. There’s a good chance you’ll find more there!
👀 5min read
📸: Christian Stahl via Unsplash
A typical homebuying checklist includes:
Obviously, these things can be really hard to achieve!
The 20% down payment is especially tricky. Let’s say you want to buy a $500,000 home. That’s a $100,000 down payment – who the heck has $100k just lying around? Most people can’t afford that. (If you can, awesome! Either way, that’s a BIG number.)
Fortunately, that’s where first time homebuyer programs come in.
First-time homebuyer programs are loans, incentives, and grants that aim to decrease the barriers to ownership for people who are purchasing a home for the first time.
Each one can support you at different income levels, homebuying stages, and more. Some examples:
There are over 2,000 homeownership programs available across the country at the city, state, and federal level. So if you don’t think you qualify for one, there is a high chance you’ll find another first-time homebuyer program option that’s right for you.
Plus, homebuyer programs are not limited to first-homes. Over 38% of programs also include “repeat homebuyers” who acquired a home in the last 3 years. Cool, right?
We’ll be blunt. There’s no easy way to choose. Because there are SO many options!
Here’s how you can narrow it down.
If you plan on owning a home one day, a great place to start is your own financial wellness. What’s your income? Can you afford a mortgage? Do you have enough for a down payment? How much are you willing and able to pay on all that? And so on.
Penny has a great bite-sized module on Home Buying that’s automatically included with a paid membership. It’s a great tool to help you plan your next steps, start saving, and get a head start as a first-time homebuyer with easy, digestible education.
Here’s a rent vs. mortgage calculator sneak peek:
>> Not a member? No problem. Take the free 3min money quiz and input your down payment or mortgage into the “debt” section. It’ll give you a better idea of how much you can reasonably afford. ;)
Which first-time homebuying programs do you qualify for? Each state or city can have different programs and grants available. The federal government has theirs. And there are slightly different income and credit requirements for most.
For example, many programs enable homebuyers to pay only 3% down mortgage (instead of the 20% recommended).
Plus, you could qualify for more than one program or be eligible for additional grants or tax credits. So, always do your research.
Once you identify your budget and which programs you might qualify for, it’s time to plan your next steps.
Some programs require that you complete an online or in-person first-time homebuying class. Random, right? Your realtor or lender should be able to guide you in finding one.
The goal is to help keep yourself accountable, and empower you to navigate tough financial decisions with ease. (Kind of like what Penny does for your wallet.)
20% of the home’s purchase price is the ideal down payment required to buy a house.
At least, that’s the golden rule. If you put down less than that without qualifying for a first-time or repeat-buyer program, you will most likely have to pay mortgage insurance -- which can add up to hundreds of $$ a month. (Yep, they get your money one way or another.)
>> Pro tip: Keep your down payment savings in a high-yield savings account for at least 3 months prior to wanting to buy a home, and maximize your earnings.
Between homebuying, budgeting, investing, saving for retirement, and just doing your best to live your life – money planning can be a lot to handle on your own. Thankfully, you don’t have to.
Need to plan it all out? Sign up for Penny.
First, we’ll help you discover your wallet’s untapped potential. Then, we’ll help you stay on track with personalized money insights and monthly check-ins, delivered straight to your email inbox. Your first home might be closer than you think!
Government loan programs:
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