Down Payment Strategies for First-Time Homebuyers

The idea of buying a home is exciting. However, coming up with a sizable down payment can remove some of the joy from the process.

According to the National Association of Realtors, the current median home price in the U.S. is approximately $396,900. 

The traditional 10 or 20 percent down payment for even an average-priced home would require substantial savings. Fortunately, there are options available to help first-time home buyers obtain the goal of homeownership. For qualified borrowers, this includes loans with reduced or no down payment requirements, and down payment assistance loans that may be forgiven after a certain number of years.

Down Payment Resource’s Q4 2024 Homeownership Program Index (HPI) Report shows an increase in homebuyer assistance programs. Twenty-two new programs brings the total to 2,466 – the highest number of programs recorded by the report. 

According to Down Payment Resource’s latest report, 74% of Homebuyer Assistance Programs nationwide offer downpayment and closing cost assistance with a variety of repayment criteria:

• 80% deferred payment
• 54% forgivable loans
• 52% forgivable loans with deferred payments

SouthState Buyer’s Advantage Loan

One available SouthState mortgage offering is the Buyer’s Advantage program. Through this program, qualified borrowers can receive up to 100 percent financing based on the lesser of the purchase price or a bank-accepted appraisal. Additionally, no Private Mortgage Insurance (PMI) is required.  If the borrower’s home is not located in a Low or Moderate income tract or tract that is greater than 50% minority, applicant income must be 80% or less of the Estimated MSA Median Family Income level.

SouthState Community Advantage

SouthState is also proud to offer Community Advantage, a lending program designed to make homeownership more accessible for first-time buyers. This program also offers up to 100 percent financing based on the lesser of the purchase price or a bank-accepted appraisal with no PMI required. Borrowers must have a 600 minimum credit score and meet income eligibility requirements the home is not located in a tract that is greater than 50% minority. Additionally, the  home must be located in select counties in Alabama, Georgia, Florida, North Carolina, South Carolina, Texas and Virginia.

SouthState Opportunity Advantage Loan Fund

Developed to help homebuyers overcome financial barriers to homeownership, the Opportunity Advantage Loan is a forgivable second mortgage. Applicants are eligible for a 0-percent interest, zero-payment second mortgage of up to $5,000 to put toward a down payment, closing costs or other fees. The loan is forgivable with no repayment if the borrower remains in the home for five years.

The loan must be combined with a HomeReady®, Home Possible® or Community Advantage mortgage. Borrowers must also meet income eligibility requirements.

Government-Backed Mortgage Loans

SouthState also gives it borrowers access to three government-funded programs that offer home buyers the option of a lower down payment:

Veteran Administration Loans

The VA offers loans to qualified active duty and veterans who meet specific military service requirements. These loans have limited closing costs, competitively low interest rates, and grant the ability to purchase a home with no money down.

Federal Housing Authority Loans

FHA loans can be ideal for certain qualifying homebuyers with a down payment as low as 3.5% of the purchase price.

US Department of Agriculture Loans

The USDA offers loans to qualified borrowers to purchase homes in designated rural areas with no down payment required.

Down Payment Assistance Programs

Across the country, there are also assistance programs that can help qualified individuals secure a down payment by obtaining a small dollar second lien loan to supplement their primary mortgage loan. Many of these programs occur on the state and local level, combining grants, zero-interest loans, and a combination of tax benefits and low-interest rates.
 

• The Federal Home Loan Bank Atlanta annually funds two loan assistance programs that may be accessible to homebuyers in SouthState’s footprint .
  • The Community Partners Product provides up to $20,000 in down payment and closing cost funding to current or retired law enforcement officers, educators, health care workers, firefighters, and other first responders; and veterans or active-duty members of the U.S. military or their surviving spouse that are first-time homebuyers or non-first-time homebuyers.
  • The First-Time Homebuyer Product provides up to $17,500 in funds for the down payments and closing costs. 

SouthState works with many state and local down payment assistance providers in our eight-state footprint. Each provider has its own specific qualification requirements which may include: a maximum sales price, borrower income limits, minimum credit scores, or requirements to attend homebuying counseling. While many programs are intended to serve first-time homebuyers, some may grant loans to a buyer who has not owned and occupied a primary residence within the past three years.

In summary, putting down 20 percent on a home you desire isn’t always possible. If you are struggling to find the funds for the required down payment, there may be loan options and assistance programs available to help. They include federal government-backed loans, bank loan programs, and state and local down payment assistance programs.

Terms are subject to change so please contact a mortgage banker to determine if you qualify for any of the programs.