Don't Let These Down Payment Myths Turn You Away From a Mortgage

The Savvy Synopsis

When buying a home, you might hear a lot of rumors or myths about what you need for the down payment. Believe it or not, home buying could be easier than you thought, especially when considering down payment programs or financing options. Angie will dispel a few common myths when it comes to your down payment. 

Did You See This?

0:38 – Introduction to home-buying myths

  • Setting expectations helps with the home buying process.
  • New study shows millennials spend $100,000 in rent by age 30. 

4:15 – MYTH: You need at least 10-20% for a down payment.

  • How much Americans put down on average is lower than you might think.
  • There are even 100% financing options that exist.
  • A higher down payment has benefits that could save you money.
  • What’s the difference between 5% down versus 10% down?

7:02 – MYTH: Down payment programs are only for first-time homebuyers.

  • Explaining the Down Payment Assistance program and how it can be used.
  • Although you are getting down payment assistance, you do have to pay it back.

10:01 – MYTH: It’s difficult to qualify for down payment assistance.

  • These restrictions do apply.
  • Some require a certain credit score, a max income limit, and a particular debt-to-income ratio.

11:02 – MYTH: You can’t use gifts, grants, or loans for your down payment.

  • Find out which gifts can be used and what’s needed if you do.
  • City of Raleigh has up to $20,000 of down payment assistance money to give but does have stricter guidelines.

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The Host:

Angie Cole - Contact - Call: 919-538-6477

Show Transcription:

Note: This is an automated transcription. Please forgive the robots as they tend to make some (a lot of) mistakes...

Speaker 1: It's time for the savvy real tour podcast I'm Walter Salt alongside Angie Cole, the owner and broker in charge of a co realty serving you throughout the triangle, teaching you about the ends announced When it comes to buying or selling a home, you can find the team online by going to a coal realty dot com. That's a c o l e realty dot com, or by calling 0 91957831 to 8. That's 919578331 to 8, and now it's time for one of the top rail tours in the triangle. Angie Cole and the savvy real tour podcast. A lot of the time I know Angie, you're spending busting myths about the real estate world. People kind of come in with preconceived notions. I'm sure all the time you're like Well, actually you might get annoyed by saying, Well, actually, over time well, actually, we we want to do this. I get surprised, right?

Speaker 2: Yeah, all of the time. Or also just setting expectations, Thio, especially with the market that were in, you know, setting those expectations. You know, Travis had a great question earlier about OAS soon as a home hits the market, they're gone, which he's right in some cases so setting expectations of Hey, we need to move quickly. We might need to make an offer above list price. You might not be able to negotiate, you know, But I know you're about to go into some other myths that we commonly here, which can scare people away, you know, and it's not always as hard to buy a home, is what some people feel, and I actually this is not the topic, but it just was something random that I read an article about recently, and I think the information maybe came from Zillow. A truly a. But they say that millennials will spend on average $100,000 in rent by the time that they reach the age 30. Wow, isn't that crazy? Crazy? And so you know, you think

Speaker 1: 1000 a

Speaker 2: $100,000 this and I say that because it's going to you kind of go hand in hand with what we're about to talk about and mortgages and what not, but that seems unreal. But my husband and I were talking about it, and we did the math, and you know that is 100% true if you even go from $100,000 100% 18 to 30 on average. And I think we did like $1000 a month for the rent, which in many areas rent is a lot more than that. And that puts you at, I think, 120,000. So I mean, that's after getting based off of going from 18 authority, maybe $800 a month or so. Don't quote me on that, but it was amazing to see that people spend, on average $100,000 towards rent. You don't own anything is not going towards anything right? And then we

Speaker 1: just did the math. I was 45,000.

Speaker 2: You're 45,000

Speaker 1: approximately doing rough math here,

Speaker 2: and you do it.

Speaker 1: If you combine my wife's, you know, rent buy into that which sheep than separately paid. Yeah, compared to now, both having a home and paying on a mortgage. It's crazy,

Speaker 2: and it's so if you do, for example, with someone spends, even like $800 a month, say, you

Speaker 1: know, I did mine on 7 50

Speaker 2: so and you can't find that in this market anymore,

Speaker 1: he lived in really, really cheap apartment.

Speaker 2: If you do $800 a month times 12 and then 12 years from, say, 18 years old to 30 right there, you're looking at $115,000. That's

Speaker 1: not even for, like, probably a nice apartment that

Speaker 2: Z I mean, trying to find a new apartment say, in like the Raleigh, you know, you know, some better equality. I mean, I know they're now going for, you know, 1200 plus Steven, find something decent where you feel safe. So that's crazy.

Speaker 1: Mind was, you know, literally, I think, 489 square feet. It was It was a small little play.

Speaker 2: That's okay. Nothing wrong with that. Nothing wrong with that at all. But the average person spends $100,000 towards the rent. So just I think about you know, those monies that you're spending and what we could do with that as far as your mortgage and down payment and applying that towards home.

Speaker 1: Yeah, that's a great point to make. So again, preconceived notions, myths, those kinds of things, I think are all important to kind of you know, Brackett, this conversation with And so what we're talking about today, a little bit more specific. When it comes to Metz, we're gonna talk about downpayment myths. These are things that people tend to believe, and they're not necessarily true or correct. And I think this will lead us some good discussion. So, Angie, one top myth that I've seen out there is that you need at least 1 10 to 20% for a down payment in order to buy a home. That's obviously false. There's tons of different ways that you utilize that down payment

Speaker 2: 100% faults. You know, on average, I would say people that were working with I tend to see maybe three and 100% 3 1/2 to 5% as far as a down payment. But there are so many different style of loans out there, which are 100% financing. So, you know, 100% financing through state Employees Credit Union, USDA for you, no more rule areas. And then also those that RV eligible. You know, that's 100% financing as well. So a 100% 100% 100% 10 to 20% down payment is not as common as what you know one might think, and many are putting much, much lower down. So that just opens up that there's, you know, so much opportunity for everyone to buy these days. You know, you don't need that 1 10 to 20% saved up in order to make a home purchase

Speaker 1: right now, the reason that people maybe have subscribed to this thinking and I think we should recognize this there are certainly benefits to having a higher down payment. It's gonna wet lower your mortgage costs. You may not have to pay the different insurance premiums some of those kinds of things for

Speaker 2: sure. Yeah, you know the Norma's. They say once you have 20% invested into the home, you no longer have to pay that mortgage insurance. So that will cut down on your overall mortgage payment. But yes, the more money you put down, more than likely the better interest rate you probably will receive. And so the lower your mortgage payment will be. But I'm also LA times pleasantly surprised. Kind of comparing apples to apples. Have your mortgage lender do a good faith estimate for you and compare. Okay, what is the difference of putting 5% down versus 10%. Sometimes the difference in your mortgage payment is not that much of a difference toe where it makes sense to put that additional 5% down. You know, maybe it's best to put that into reserves and savings. You know, maybe you want to use it towards furniture, whatever it might be. But have your lender really run the numbers for you on the exact same home or price point? You know, with the differences of putting, you know, this amount down versus this amount Also the structure of the loan. You know, I sometimes see that actually, an FAA J loan can make up for a lower mortgage payment versus a conventional one where some people would think it would be the opposite. So have your lender run the numbers to figure out You know, what set up in scenario is best for you. And if truly putting more money down for your down payment is going to really make that huge of a difference in instead of, you know, putting some of that back into reserves or savings.

Speaker 1: Yeah, another great tip for you. And this is another myth that is often believed about downpayments is that low down payment programs are only for first time homebuyers. I'll say they get a lot of the press, but that doesn't mean that they're the only ones who could benefit from, you know, buying programs in that kind of thing.

Speaker 2: Yeah, not true at all. And remember, what qualifies a person is a first time home buyer is not that. Hey, it's your first time buying home, but is your primary residence so that could be a big difference there, too. It's just saying that, you know, this is not for an investment property. Um, and so one of the most commonly known down payment program assistance mortgages out there is called the Down Payment Assistance Program, which is through the NC Housing Finance and Agency. This can be used for both a conventional or an F H A loan, which can cover your down payment and also some closing costs. Some of the misconceptions go out there, and sometimes Kinski Air people way, but it really shouldn't is. Although you're getting this down payment assistance, you do need to pay this money back. Okay, But the only way you pay it back is out of the net appreciation. So, for example, if you go to sell your home, you then will need to pay back the assistance that you received with any type of appreciation. You made up your home last real estate commissions as well. And so based on how long you've lived in the home, will determine what portion needs to be paid back. But the thing is, this is kind of like a loan. So is no difference than you obtaining financing for your home. The great thing about this is it will not accumulate interest. So although with alone you know you're getting alone maybe 100% financing you're paying the additional interest LA times you make your mortgage payments. Most of it's going towards interest in the beginning with the down payment assistance. You know, you're getting kind of like this free money and you're not paying interest on it. So, yes, in the long run, do you have to pay a back? Yes, but you're not paying interest on it. And once again, if you're home doesn't appreciate and maybe you take a loss on your home. You don't on top of that also have to pay this money back. And you know how Lender definitely can give you some further guidance on that. Just you clearly and understand, you know, all of the basis and the specifics of this loan program. But this is, you know, a program. I'm seeing a lot take advantage or a lot of buyers take advantage of

Speaker 1: Absolutely. If you have any questions about buying or selling a home here in the triangle, particularly if it comes to you know you're looking to buying, you're kind of wondering what kind of help can you get, especially when it comes to downpayment situations and the like. We invite you to call or text Angie at 919538 64 77. She could help answer your questions. Make sure that you're on the right track When it comes to buying or selling a home. Make sure that you have the questions that are on your mind. Answered. 919538 64 77 Call or text that number to reach Angie, that's 919538 64 77 We're talking about some of the top down payment myths that we've seen and another one, Angie, is that you know it's difficult to qualify for down payment assistance.

Speaker 2: Not necessarily true there, of course, there are certain restrictions, which all types of loans have restrictions for the down payment assistance program I just mentioned through the NC Housing Finance, an agency they do require a 43% max debt to income ratio. They do require a 6 40 credit score and not flexible on that at all. I know that there are some other loan programs where you can go lower. Aslo is maybe even 5 80 but this one does require a 6 40 credit score. And then also there is a max income limit, you know, based on the county that you live in. So, yes, there's qualifications, but they're not extreme. So you know, a lot of people qualify for the down payment assistance program and could be pleasantly surprised.

Speaker 1: Yep, absolutely so again. Not as difficult as some often believe. Last but not least, one other downpayment myth that's out there is that you can't use gifts, grants or loans for your down payment. You already busted kind of the lone one for this example, but a lot of people think that these aren't possible when they are in reality.

Speaker 2: Yeah, that's definitely you mentioned gifts. So, you know, a gift can be given from an immediate family member. They're typically a template letter that the lender will send over to be completed. You know that states that there will be no repayment of this gift is truly a gift. But yeah, gifts can definitely be used for both down payments and for closing costs. Also, you know, whoever is gifting that money we'll need thio show the availability and ability to give the money's You know, for example, just like when you are obtaining financing, you have to show your bank statements. You know how certain monies got into your account Saying goes for this money that's being gifted, you know, if all of the sudden we see $50,000 deposited into your immediate family members, maybe you're I don't know uncle's account and that someone he's gonna use what they're going to say, How did you get that? $50,000 right? So they have to show, you know, a pattern and a track record of exactly where all monies air coming from another down payment assistance program. That's not as common. Just because they do tend to run out of money. But it's called City of Raleigh, where they have up to $20,000 of down payment assistance to give. We do see that this one is a little bit more strict on the guidelines in order to qualify, and typically they run out pretty quick every year. So you know, every year it's like the program restarts and they can run out of the assistance money to give. But yeah, I mean, definitely, you know, gifts can be given. You can receive grants. Also, you know, different types of lone structures for that down payment assistance in order to help you qualify for a loan.

Speaker 1: Absolutely so lots of different moving pieces when it comes to loans and mortgages and that kind of thing. And this is why you and Ned Ligon have put together a great app for people to learn more about kind of that mortgage process. And, you know, it could help answer some of these types of questions.

Speaker 2: Yeah, that's definitely you know, Ned, of course, always healthy. Whenever we have these specific questions about, you know, mortgages and down payment. I love to pick his brain on it, and I always learn something new when chatting with him. But if you are thinking about buying a home and you want to speak further with the lender, you want to talk more through the different down payment assistance programs, the different types of loans and programs out there to see if you can qualify for a loan. I would love to connect you with Ned Ligon with Movement Mortgage, and he has a really cool app that you can download to your smartphone. From there, you can get prequalified. You can look at current interest rates and then, of course, ask him questions and connect with Ned, and so did download the mortgage app to your smartphone. Text the word lending to the phone number 555888 Once again under smartphone, just text to the number of 555888 In the text socks, you're gonna tax lending, and from there a link will be sent to you. Click the link, and it will take you to either your Google store. Is that what it's called or your

Speaker 1: Google Place

Speaker 2: Google play or the Apple store will

Speaker 1: download the APP,

Speaker 2: it will download it for you. And once again, it's just a really neat tool. And you can also look at your payments. You know as well, so lots to do on the app. And then it's a great starting point to get prequalified because that's the number one step with buying home

Speaker 1: calculators, all that kind of stuff to lending. That's the word that you text to the number 555888 again, just text the word lending to 555888 to download that great mortgage app. This has been the savvy real tour. Thank you so much for tuning in today. Lots of great questions from listeners. Also, some really good topics and information from Angie and her team, thanks to all the other guests for joining us today as well. One more time. If you have questions about buying or selling a home, it pays to have somebody on your side and expert here in the triangle who can walk you through all the nuances. It's such a competitive market right now. You've got to make the right choices when it comes to buying and selling your home. If you'd like to tap into that expertise that Angie and her team have here in the triangle, all you have to do is call or text Angie directly to start the conversation. 919538 64 77 is the number to call or text to reach her directly. That's 919538 64 77 9195386477 Angie, Thanks for time this week. We'll see you next week.

Speaker 2: Yes, I was wonderful. Thank you so much.

Speaker 1: You've been listening to the savvy real tour podcast on Walter Store Holt alongside Angie Cole. She's the owner and broker in charge of a co realty here in the triangle. And if you have questions for Angie, we invite you to go online to a coal realty dot com. Listen to past podcast episodes on the website, read the block and all the great information, including the option to find a home right there on the Web site. That's a coal realty dot com, and you can also call Angie with your questions. 919578 31 28 Yeah,

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