Let's talk about down payments
Saving for a down payment on a home may seem like a huge challenge, but it doesn’t have to be. If you start with a budget, learn about your options, and make a plan, you'll have a clear path to your goal. Here are some ideas to help you get started.
Be sure you know what you can afford
If you don’t have a budget, start by listing all your monthly income and expenses. That will tell you how much extra you may have for savings, as well as estimate how much you’ll be able to afford in future mortgage payments. Keep in mind that ideally, mortgage, property taxes and homeowner’s insurance should not be more than 28% of your gross monthly income.
Explore the full range of down payment options
The amount you'll need for a down payment depends partly on the type of mortgage you choose. While 20% may be traditional, there are many options that require much less. The difference can be huge. For example, a 20% down payment on a $300,000 home would be $60,000, but a low-down-payment mortgage might require as little as $9,000.
Low down payment options include FHA loans and VA loans, as well as the Bank of America Affordable Loan Solution® mortgage, which lets you put as little as 3% down.Footnote1
Don't wait to start saving, even if you have to start small
Even if you can’t afford a lot, start saving something out of every paycheck. That can help build a habit of saving. If your budget seems too tight, consider cutting back on nonessentials, like dining out or premium TV. Then set up automated payments into your savings account to make saving easy. You may even want to set up a special account that’s just for your home purchase.
Look for creative ways to save
If you receive extra money, such as a tax refund or a work bonus, add it to your savings. Or skip the vacation and try a staycation instead — then put the money you save into your down payment fund. You can also consider raising extra cash with part-time work, such as driving for a ride-sharing service, tutoring or selling goods on the internet.
Look for down payment help
You don't have to do it all yourself! There are many programs for first-time homebuyers that can help cover the cost of a down payment. For instance, Bank of America's Down Payment Grant program offers up to $10,000 for a down payment or 3% of the purchase price, whichever is less.Footnote2 Plus, if you qualify, the grant funds do not need to be paid back.
Don't rule out using gift funds
If you have a family member who is willing to contribute, you may be able to use gifts to add to your down payment. There are rules around doing this, so you'll need to work with your lender to be sure the gift will qualify. At the very least, you'll need a signed statement that the money is indeed a gift and not a loan that needs to be repaid.Footnote3
A note from your lending specialist
Even if you’re not quite ready to buy a home, I’d be happy to talk to you about differentmortgage programs and homebuyer assistance that can help you get your plans moving.
1 Maximum income and loan amount limits apply. Fixed-rate mortgages (no cash out refinances), primary residences only. Certain property types are ineligible. Maximum loan-to-value (“LTV”) is 97%, and maximum combined LTV is 105%. For LTV >95%, any secondary financing must be from an approved Community Second Program. Homebuyer education may be required. Other restrictions apply.
2 Qualified borrowers must meet eligibility requirements such as being owner-occupants and purchasing a home within a certain geographical area. Maximum income and loan amount limits apply. Minimum combined loan-to-value must be greater than or equal to 80%. Program funds can be applied toward down payment only. Borrowers cannot receive program funds as cash back in excess of earnest money deposits. Down Payment Grant program may be considered taxable income, a 1099-MISC will be issued, consult with your tax advisor. May be combined with other offers. The home loan must fund with Bank of America. Down Payment Grant may only be applied once to an eligible mortgage/property, regardless of number of applicants. Homebuyer education is required. Bank of America may change or discontinue the Bank of America Down Payment Grant Program or any portion of it without notice. Not available with all loan products, please ask for details.
3 The Do’s and Don’ts of Down Payment Gifts, Holly Welles, My Mortgage Insider, July 25, 2022.
MAP5352287 | 12/2022