How Government Grants for First Time Home Buyers Can Ease the Burden
Raising the finances to buy a home is never easy, but with government grants for first time home buyers the task is made less difficult. In fact, the possibilities for young couples are much greater.
For many people buying their first home, the pressure is not so much the mortgage repayments that they might face, but in getting the down payment together that is expected by most lenders. This can account for anything from 5% to 10% of the value of the property, which may mean $10,000 or $20,000 on a $200,000 home. Finding alternative funding to help get this money together make a huge difference.
Now, with government grants to help to secure this vital part of the transaction, the most difficult part of the equation is now more or less handled.
How $15,000 Can Help
The importance of the down payment cannot be understated, so the availability of government grants for first time home buyers makes this one challenge all the easier to overcome. Down payments are needed because lenders rarely provide 100% mortgages, and if they do only at very high interest rates.
More common is a mortgage of 90% of the value of the home, meaning that 10% must come out of the pocket of the buyers themselves. This is obviously the real hurdle to clear, with the task of saving such large sums of money very difficult to accomplish in these economic times. So, alternative funding can be considered a must.
With the grant, the task of saving a $20,000 down payment on a $200,000 home is eased to just $5,000 and adding it to the government grant of $15,000. Once this is done, lenders are more open to approving the mortgage application.
How A Grant Eases the Burden
Of course, a grant is very different to a loan in the sense that they are not expected to be repaid at all. So, in getting a $15,000 government grant for first time home buyers, the down payment can be got together with no need to repay the sum.
This means that the common strategy of getting a personal loan for another lender to cover the down payment is not necessary, nor the interest rate applied to it. By accessing the available alternative funding, a home buyer can concentrate their efforts fully on repaying the mortgage.
In the long run, this translates to thousands of dollars of savings over the lifetime of the mortgage. And that is where the burden is eased thanks to this government grant. These savings can be used constructively elsewhere.
Making the Most of the Break
There is no doubt that the availability of these government grants for first time home buyers are something of a God-send to those people who are setting up home for the first time. But it is possible to extend the advantages of the grant even further.
While this kind of alternative funding ensures that $15,000 is secured for the down payment, wise investors will look to maximize the break by saving as large a fund as they can. So, if they manage to save $10,000, they can knock $25,000 off the cost of the mortgage. This is even better news from the point of view of the lender.
Of course, getting approval for the government grant is the first step on the road to securing a first home. It is generally advised to make the application as soon as possible.
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ABOUT THE AUTHOR
Joycelyn Crawford is the author of this article. For more information about Easy Loans for Bad Credit and Bad Credit Home Loans please visit her site http://www.easyloanforyou.com