3 Creative Financing Options to Secure Your Dream Home

In the market today, it is important to explore creative ways to secure your dream home. This could be altering your strategy for your down payment, or even the type of mortgage loan you use. We will be exploring three different creative financing solutions you can use to lock in your home TODAY.

Down Payment Assistance

A recent survey from Bankrate asks prospective buyers to identify the biggest obstacles in their home buying journey. It found that 36% of those polled said saving for a down payment is one of their primary hurdles to buying a home.

If you feel the same way, luckily, there are many down payment assistance programs available that can help you achieve your homeownership goals. Here’s some information that can help you:

You Can Qualify Even if You’ve Purchased a Home Before

There are several misconceptions about down payment assistance programs. For starters, many people believe there’s only assistance available for first-time homebuyers. While first-time buyers have many options to explore, repeat buyers have some, too. According to the latest Homeownership Program Index from downpaymentresource.com:

“It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.”

That means repeat buyers could qualify for over one-third of the assistance programs available. And if you’re a repeat buyer, you may still be able to take advantage of some first-time homebuyer programs, depending on your personal situation. That’s because downpaymentresource.com also notes many of the first-time homebuyer programs use the U.S. Department of Housing and Urban Development’s definition of a first-time homebuyer. Under their definition, you could qualify as a first-time buyer if you’re:

Someone who hasn’t owned a primary residence in 3 years.
A single parent who’s only ever owned a home with a former spouse.
That means no matter where you are in your homeownership journey, there could be an option available for you.

If you ARE a first time home buyer, there are multiple programs available for you to get down payment assistance. Specifically in Michigan, you can access the MSHDA Down Payment Assistance program. The Michigan State Housing Development Authority (MSHDA) offers a Down Payment Assistance (DPA) program in conjunction with a MSHDA first mortgage, to help homebuyers overcome down payment obstacles and obtain the dream of homeownership.

Down Payment is available to qualified borrowers who meet the eligibility which includes but is not limited to, income, credit and property type requirements.

Single Family DPA

Up to $7,500 in down payment assistance; can be used for borrower paid closing cost, prepaid expenses and down payment.
The DPA second mortgage terms include 0% interest and no payments until the home is sold, refinanced, transferred or the MSHDA first mortgage is paid in full.
Borrower's minimum investment is 1% of the purchase price.
DPA loan is available with a MSHDA first mortgage*

2-1 Buydown

You’ve probably heard of “buydowns” or “temporary buydowns” before, but you may not know exactly what that means. A 2-1 buydown is a mortgage loan option in which the seller reduces the homebuyer’s interest rate for the first two years of the loan. In year one, the interest rate is 2% less than the original, locked-in rate. In year two, the interest rate is 1% less.

Example: If you’ve locked in a 6.5% interest rate, a 2-1 Buydown Program would allow you to make monthly payments at a 4.5% interest rate for the entire first year of your mortgage. Then, in year two, your payments would be based on a 5.5% interest rate. Finally, once you hit year three and for the remaining life of your loan, your payments would reflect your originally-agreed-upon 6.5% interest rate.

A 2-1 Buydown can help you secure your dream home, while paying less for your first two years of homeownership.

Adjustable Rate Mortgage (ARM)

An adjustable-rate mortgage is a home loan with an interest rate that adjusts over time based on the market. ARMs typically start with a lower interest rate than fixed-rate mortgages, so an ARM is a great option if your goal is to get the lowest possible rate. However, the initial low interest rate won’t last forever. After the initial period, your monthly payment can fluctuate, so it is important to take this into consideration when budgeting your monthly payments.

How does it work?

ARMs are long-term home loans with two different periods, called the fixed period and the adjustable period.

Fixed period: First, there’s an initial fixed-rate period (typically the first 5, 7 or 10 years of the loan) in which your interest rate won’t change.

Adjustment period: Then, there’s a period in which your interest rate can go up or down based on changes in the market.

Example: Let’s say that you take out a 30-year ARM with a 10-year fixed period. That would lead to a fixed rate for the first 10 years of the loan. After that, your rate could go up or down for the remaining 20 years of the loan.

The Takeaway

As you look at your financial situation, it is easy to get discouraged about finding your dream home… but that doesn’t have to be the case! There are options to help you get on your feet and secure your dream home, without taking MORE money out of your pocket. If you are ready to explore these options, feel free to reach out to us to get started on your home search journey.

About Us

We are award-winning real estate agents with Keller Williams Real Estate. We specializes in providing clients with a superior experience from start to finish. Our top priority is ensuring your home selling/buying process is smooth, successful, and memorable! With real-time updates of all properties for sale, you have direct access to everything you need. To push our level of client service, our team has expanded across the state of Michigan, bringing first class agent services, title, resale, new builds, and now mortgage services, to the consumer, making a seamless experience for any home buyer or seller.

In 2021, we closed 328 transactions for over 93M in sales volume, ranking us amongst the top teams in the State of Michigan, and we continue to grow and maintain these numbers for 2022! We have team members operating out of offices all across Michigan, serving the areas of Rochester, Royal Oak, Ann Arbor, and Northville! Connect with us today to work with one of the Nation’s top ranked teams for your real estate needs.