Conventional financing now allows soon-to-be married couples to set up a down payment gift account, so they can accumulate wedding gift funds for the down payment to purchase a new home. Instead of getting a toaster and extra knives that never see the light of day, married-to-be couples can get the wedding gift of their dreams, a beautiful new home! Conventional only requires a minimum down payment of 3% to qualify. Check out these tips how to qualify.
Lack of down payment funds, the #1 reason people can’t buy a home
As this study below by Yahoo Real Estate confirms, the #1 reason renters can’t buy a home is because they don’t have money for a down payment. Over 53% of people in this study confirmed this.
Therefore a good idea in today’s market place, is to teach buyers creative ways how to get access to funds to purchase a home.
I am sure many soon-to-be married couples would rather purchase a home than get many of the gifts they end up receiving :). People just don’t know this is an option available to them.
With monthly rents continuing to rise in California, buying a home is a good idea for young couples, as they are combining incomes and can afford to purchase a bigger home for their family.
As you can see below, just a 4% increase in annual rent, can drive a $1,500 monthly rent up to $1,974 in just 8 years, an increase of $474, which is a 32% increase in overall rent.
Compare this to buying a home and locking in a low fixed rate and monthly payment that will not increase.
When you own a home, it is a great hedge against inflation for the future too, whereas rent will continue to go up over time.
Help married-to-be couples set up a down payment fund
Conventional financing allows couples to set up a “Down Payment Gift Account” if they are planning on getting married soon and want to accumulate funds for their down payment to buy a home?
As conventional financing only requires a minimum down payment of 3%, this is a great way for “married-to-be” couples to come up with their down payment to purchase a home.
Just like registering at a specialty or department store, register a down payment account instead. Then your friends and family are able to make gift payments into an interest bearing account on your behalf.
This is also a great marketing tip for Realtors too, so you can help your friends and family get in a position to purchase a home and also help them close the transaction, a win-win for everyone.
Here’s how it works in 3 simple steps:
*Open a savings account at your bank prior to the wedding.
*Friends and family will be given the banking information where the gifts will be deposited.
*All of the gift funds can go towards the required 3% down payment for conventional financing.
It’s that simple!
Crowd-Funding sites for down payment funds
More recently, niche crowd-funding sites have been popping up to help people with down payment funds. A number of them focus on helping people raise cash for real estate-related pursuits, including cobbling together enough cash for a down payment.
Feather the Nest, for example, lets users create pages where they can use text, photos and video to describe what real estate aspirations they want contributors to help them fund. Users then share their campaigns through email and their social media accounts.
Feather the Nest isn’t the only company trying to help people crowd-fund down payments. Hatch My House also target couples who would prefer down payment assistance over cutlery and candlesticks.
According to Hatch My House, the average price of a wedding gift is $125, while the average number of gifts for a wedding is $70. So perhaps people are a little more generous knowing that couples are trying to raise money towards buying a home, versus just buying them individual gifts.
Additional help to pay buyers closing costs: Use a Lender Credit!
If buyers need additional funds to help pay for closing costs, we can offer them a lender credit that can pay all of their closing costs.
Buyers and agents have to get creative these days to get an offer accepted. For example, a purchase offer asking for seller credits to pay for a buyers closing costs will usually always place behind a buyers offer that does NOT ask for any seller credits! Most people assume because a buyer does not have funds for closing costs, just ask the seller to cover them.
So to make a buyers offer more competitive, we can pay for ALL the buyers closing costs with a lender credit!
How does this work? It’s easy, instead of taking let’s say a 4.5% 30 year fixed rate on a loan, the buyer will take a slightly higher rate of 4.75% instead, and with this higher rate there is a lender credit of roughly 2% available that can be used to help pay closing costs.
Not only is this a good negotiating tactic, but of course it saves the buyer a lot of money too if they do not have the funds to pay for their own closing costs! I present this option to all our buyers so they know it is available!
What is a “Gift of Equity” purchase?
Another purchase option available to buyers that many people don’t know about, is a “Gift of Equity Purchase”. We have been doing several of these transactions recently, and they are a great idea in this market with the shortage of properties for sale. Here is how it works.
Let’s say a family member wants to sell a property to another family member. The parents (sellers) can gift some of the equity as a down payment to their kids (buyers). Conventional financing only requires a gift of equity of 5% to qualify for this program.
If you have any questions about any of this information, or you would like to get approved for financing, please feel free to contact me directly at 858-442-2686.