Government Grants for First-Time Home Buyers - Down Payments Made Easy
The arrival of government grants for first-time home buyers means hopes once thought quashed by the economic crisis by many young couples and families, are still alive and kicking.
Even for properties expecting higher down payments, this lump sum is enough to make a significant difference to efforts to save the required amount, making home buyer government grants a lifesaver for many young people.
While the stresses traditionally associated with property buying are not completely lifted, it is clear that the arrival of grants that aid home buyers are equally beneficial to the realty sector too.
Why a Down Payment is Necessary
Some might wonder why the down payment cannot be skipped, thus diverting all funds towards securing and repaying a home loan. But the fact is that getting a mortgage at all is difficult when no down payment is provided, making government grants for first-time home buyers so significant.
The main advantage in putting money down on a house is that it reduces the actual mortgage that a borrower needs to complete the purchase. For example, if a home is worth $150,000, then a 10% down payment would reduce the necessary loan to $135,000, thus reducing the principal owed, the monthly repayments and, in some cases, the interest rate charged. Home buyer government grants allow a $15,000 payment to be made.
And in a market so badly affected by the economic crisis of the last few years, grants that aid home buyers mean that full advantage can be taken by borrowers looking to buy now while house prices are low.
Problems for First-Time Buyers
The reason why government grants for first-time home buyers are so beneficial is that the issues surrounding saving large sums of money as a down payment are simply by-passed. In the current economic climate, getting $15,000 together in order to pay for a 5% or 10% share of a new property is not easy at all.
This problem is worsened by the fact that bad credit ratings, which a large percentage of the American public have developed through no real fault of their own, hinders the chances of getting financing.
And for young couples and families, home buyer government grants are the only way to secure the type of financing needed to buy a property, while also meeting their monthly obligations. So, grants that aid home buyers are very welcome indeed.
Government Grants Explained
The purpose of government grants for first-time home buyers is to help to get the realty market back on its feet. It can be very difficult to get onto the property ladder when no property is owned in the first place. And often, it is the down payment, and not the actual mortgage, that is the problem for first-time buyers.
Home buyer government grants are designed to remove that hindrance by providing $15,000 towards a down payment on the property to be purchased. Once that is placed, then the route toward a 90% or 80% home loan is opened, and the chances of getting approved are greatly increased.
There are two chief advantages to grants that aid home buyers. Firstly, it is not the same as a loan in that is does not need to be repaid. This means that it is effectively getting a down payment for free. And secondly, the grant ensures that from the very beginning, the home buyer possesses equity in the home, worth around $15,000.
Clearly, the availability of government grants for first-time home buyers is a major boost for everyone seeking to buy their own home for the first time. And, once on the route to home ownership, the challenge of meeting the mortgage repayments is the chief concern.
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ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com