It took 52-year-old social worker Nancy Peterson a combination of five different grants and low-interest loans to accumulate $80,000 for the down payment she needed to become a first-time home buyer in Seattle last summer.
Peterson's modest income was far too low for Seattle's soaring housing market, where the median home price is now over $700,000. Without the assistance, Peterson would have only qualified for a $100,000 purchase with a loan insured by the Federal Housing Administration (FHA).
Many middle-income people give up on purchasing a home when they cannot come up with a 20 percent down payment, but Peterson was lucky enough to have real estate agent Lindsey Sargent help spot local assistance programs. They were able to cobble together a 40 percent down payment to get a $232,000 two-bedroom condo 25 miles north of the city.
"The programs are not well understood, and there aren't nearly enough to serve all the need," Sargent said.
The prospect of getting outside help, or a lower down payment than the traditional 20 percent, does not occur to many.
In a 2015 Fannie Mae survey, 76 percent did not know they did not have to have 20 percent for a down payment.
With home prices rising more than wages, home buyers instead have been turning increasingly to parents and family members for help. Yet, as a general rule of thumb, if you have solid income and a good credit score over 700, you can get some conventional loans with just 3 to 5 percent down, said Peter Boomer, head of mortgage distribution for PNC Bank. And you can get an FHA loan geared toward first-time purchasers for just 3.5 percent down with a credit score as low as 640, he said. There are even loans from the Department of Veterans Affairs with no down payment, for those who qualify.
In addition, there are over 2,500 different programs that provide grants and low-interest loans for down payments and closing costs, said Rob Chrane, chief executive of Down Payment Resource which tracks them.
