Last updated June 24 2022
A program for home buyers who have established an excellent credit history but have not yet saved the required down payment or have chosen to use their savings to build assets in different ways.
Yes, we understand that sometimes saving the required down payment for a new home can be challenging. The good news is that through some of our mortgage lending partners and insurers, it is possible to purchase a home using none of your own savings. The Borrowed Down Payment mortgage program helps make it possible for you to start building equity in your own home without having to save for years.
The program has strict qualifying criteria and works when you can meet the following conditions:
If you don't meet the criteria you will have to come up with your down payment another way, perhaps gifted from a parent, sell something, or good old fashioned savings.
To put this program together successfully, you have to put 3 things in place
Here are the requirements to be approved for the program:
Here is an example for what it would take to purchase a home priced at $600,000.
Per standard mortgage qualifying rules, for a $500K purchase you would require 5% down payment ($25,000) plus an additional ~1% ($5,000) or more for the closing costs you will have (lawyer, property inspection, applicable taxes, utility connections, etc.). So you need a mortgage for $475,000 and a down payment loan for $25,000. Generally, you must have at least the closing costs in savings.
$2885/mo - your monthly mortgage payment (~a third of this is mortgage balance reduction) (ex 4.99% interest, 25 year amortization)
$ 500/mo - the borrowed down payment loan repayment (ex. 7.5% Interest, 5yr term)
$ 300/mo - property taxes to the town or city
$ 200/mo - fire/property insurance
$3885/mo - TOTAL COST OF OWNING YOUR OWN HOME - COMPARE THAT TO PAYING RENT
Guideline Income: to qualify for this mortgage, your household taxable income should be about 1/4th the house price or more. $500K/4 = $125K/yr as a guideline income. In addition your jobs have to be stable and very good credit.
Setting a goal to get your own home is a big deal and an exciting journey. It starts with a dream, followed by taking some initial "discovery" and "exploration" steps. At some point you get the first sense that "hey, this may be possible!" Before you know it you are looking at homes, then one day ... it's moving day and a place to call your own. I'm happy to be part of your journey....
Understanding mortgage finance is a key part in your plan and journey. To get a home, you need to be able to qualify for a mortgage. Your income needs to be stable and sufficient to pay your existing debts and the new mortgage, your credit profile has to show that when someone extends you credit that you pay them back on time and as agreed, and you have to have the required minimum down-payment, and - understandably - that can be hard to save in today's environment. For those with strong employment and strong credit, there may be a short cut for down payment, which we discussed above, called the Borrowed Down Payment Program, and there are other ways too.
Warning - all of the criteria above are requirements for the program, so please double check. If you can meet all 6, please complete a profile and we'd be happy to provide an assessment upon receiving it.
As licensed professional mortgage brokers, we know exactly what it takes to qualify you for a mortgage and we do more than just get you a great mortgage at a great rate, we will show you the way, too.