Buying a home is one of the biggest financial decisions most of us will ever make, and one of the first major choices you’ll need to face is deciding which type of mortgage to get.

If you’re a first time or low income home buyer, you may be considering an FHA loan through the Federal Housing Administration, or maybe a conventional loan makes more sense for you.

Both FHA vs conventional loans each have pros and cons. We will break it all down for you so you can decide if FHA or conventional is best for you.

Are you trying to figure out which home loan is right for you? Need to save money for closing costs? We can help you save thousands with our realtor rebate program. Fill out the form below to learn more!

What Is a FHA Loan?

As the name implies, FHA loans are insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). 

Here’s the deal with FHA loans – because the FHA insures a portion of the loan for the lender, borrowers are able to get more favorable terms. That includes a lower down payment and more relaxed credit requirements compared to conventional mortgages.

This has made FHA loans very popular, especially for first time homebuyers who might not have the best credit scores and little in savings. You may even be able to qualify for moving assistance programs.

To qualify for an FHA loan vs conventional, you’ll generally need the following:

• A credit score of at least 500 (the higher, the better to avoid huge down payments)
• Steady employment and income
• A debt to income (DTI) ratio below 43 percent

While the credit score and DTI requirements are definitely more lenient than conventional loans, FHA borrowers still need to prove that they can still reasonably afford the mortgage payments.

What Is a Conventional Loan?

A conventional mortgage is a home loan that isn’t backed by any government agency. Instead, it follows guidelines set by Fannie Mae and Freddie Mac, the two major private companies that buy mortgages from lenders.

Because conventional loans vs FHA loans don’t have government insurance protecting the lender, they typically have stricter credit and income requirements:

• Minimum credit score around 620
• DTI ratio under 43-50 percent in most cases
• Down payment of at least 3 percent for many lenders

The higher your credit score, the lower your interest rate and down payment will be. For borrowers with great credit, a credit score of 700 or more, and enough asserts, they can usually make a very low down payment, like 3-5 percent. 

Key Differences Between FHA and Conventional Loans

These are the key differences between FHA vs conventional loans.:

Down Payment Requirements

Let’s start with down payments, which are a huge factor for most homebuyers. FHA loans allow down payments as low as 3.5 percent for borrowers with a credit score of 580 or higher. For the credit scores between 500 and 579, you need to put down a minimum of 10 percent.

For conventional mortgages vs FHA, the down payment can be 3 percent or higher depending on your credit score and the lender’s specific program. You can avoid private mortgage insurance by putting down 20 percent, but that’s something you need to plan for when saving for a house. 

Credit Score Requirements 

While we already covered some of this, there’s more to it that you should know. FHA loans tend to have lower credit score requirements compared to conventional mortgages. A score of 580 is just fine for the minimum 3.5 percent down payment on an FHA loan.

Most conventional vs FHA lenders want to see a credit score of 620 or higher. If it’s below that, they might charge higher interest rates or require a larger down payment to offset any risk. Being careful with your credit could be something to add to your mortgage checklist when preparing to buy a home.

Loan Limits

Both FHA and conventional loans have limits on how much you can borrow, which can vary based on your county. 

As of 2024, the FHA loan limits for a single family home range from a floor of $498,257 to a ceiling of $1,149,825. 

The conventional loan limits range from a baseline conforming loan limit of $726,200 to a maximum of $1,089,300 in the highest cost areas.

Mortgage Insurance Premiums

This is a key difference – with an FHA loan, you’ll pay upfront and annual mortgage insurance premiums (MIP) over the life of the loan if you put less than 10 percent down.

The upfront MIP is 1.75 percent of the base loan amount, while annual MIP ranges from 0.45 percent to 1.05 percent of the remaining balance.

Conventional loan borrowers can avoid mortgage insurance altogether by putting 20 percent down. If you don’t, you’ll have to pay private mortgage insurance (PMI) of around 0.5 percent to 1 percent of the loan amount annually.

But you can cancel PMI once you reach 20 percent equity in the home.

Property Requirements

For an FHA loan, the home must meet HUD’s minimum property requirements and standards. An appraiser will inspect it thoroughly, looking for any potential defects or hazards.

Conventional mortgages don’t have federally mandated property standards for the home itself, but an appraisal is still required to confirm that the value matches the purchase price.

FHA vs Conventional Rates

Interest rates are often slightly lower for FHA loans compared to conventional ones, all else being equal. The difference is pretty small, maybe 0.25 percent or so on average.

Your actual rate will depend on your credit score, loan amount, debt ratios, and the overall mortgage market at the time. 

In general though, FHA rates give conventional rates a run for their money.

How the ARC Realtor Rebate Can Help

One major way you can save money when buying a home is through the ARC Realtor Rebate program. You can be eligible for a generous cash rebate worth thousands of dollars after closing on your purchase.

Here’s how the ARC Realtor Rebate works:

1. Find a participating agent in ARC’s huge realtor network. You can use almost any real estate agent you want, as long as they are approved for the program.
2. Register for the rebate program by following this link and filling out a quick online form.
3. Work with your ARC- affiliated agent to complete your home purchase transaction. They’ll guide you through the whole process while providing expert assistance.
4. After closing, you’ll receive a cash rebate based on the purchase price of the home. The rebate amount is calculated as a percentage of the commission earned by your agent.

The rebate amounts can be substantial – for a $500,000 home purchase, you’d get $6,200 cash back. The higher the price, the larger the rebate, so it really adds up for expensive properties,

Your rebate can be used for literally anything – covering closing costs, moving expenses, renovations, you name it. It’s basically free money that gives you an excellent head start as a new homeowner and can help you save money.

With ARC, you have more flexibility and can earn up to $9,500 back on homes over $2 million. For properties above that price point, you’ll need to contact ARC directly regarding the rebate amount.

FHA Vs Conventional Loan: FAQs

What credit score do you need for a conventional loan?

Most conventional mortgage lenders require a minimum credit score of 620, but some may go down to 580 for borrowers willing to make a larger 10 percent down payment. Credit scores of above 700 will qualify for the best rates and terms.

Can you get a conventional loan with 5 percent down?

Yes, conventional loans allow down payments as low as 3 percent in many cases. Putting down less than 20 percent will require paying PMI until you reach 20 percent equity in the home.

Is a conventional loan better than FHA?

There are some advantages of getting a conventional loan vs FHA:

• Avoiding mortgage insurance with at least a 20 percent down payment 
• You can get higher loan limits in some areas
• There are more lenient property standards than FHA
• You have the option to cancel PMI once you reach 20 percent equity

Final Thoughts

Whether you pursue an FHA vs conventional loan, buying a home is an exciting, but complicated process. Partnering with the right real estate agents can make it much smoother and more rewarding.

At ARC Relocation, we can provide expert guidance throughout your entire relocation journey, plus we offer our Realtor Rebate Program. 

Our team of experienced relocation consultants can assist with everything from helping you get pre-approved for your dream home to negotiating the best deal and coordinating your move logistics.

Contact ARC Relocation today to get started.

As a member of the military or a veteran, you’ve dedicated yourself to serving our country. Now it’s time to let your service work for you as you transition into the exciting world of homeownership. 

There are several unique home loan programs designed specifically for military personnel and veterans that can make your dream of owning a home a reality. Let’s explore some of the top options available to you.

ARC Military Realtor Rebate 

One standout program is the ARC Military Realtor Rebate. Here’s how it works: when you work with a participating real estate agent to buy a home, you’ll receive a cash rebate after closing based on the purchase price. The higher the price, the bigger your rebate – we’re talking potentially thousands of dollars back in your pocket.

What’s great is that ARC partners with a huge network of agents, so you have the freedom to choose the realtor you want to work with. They’ll help guide you through the process and ARC will take care of getting you that sweet rebate cash, usually within a couple days of closing. It’s a no-brainer way to save some serious money on your home purchase.

Fill out the form below to sign up for the ARC Military Realtor Rebate:

VA Home Loans 

If you meet the service requirements, a VA home loan is hands down one of the best ways to finance your home. Backed by the Department of Veterans Affairs, these loans come with significant benefits. For starters, you can often buy a home with zero down payment. Yep, you read that right – no need to spend years saving up for a hefty 20% down.

VA loans also tend to have super competitive interest rates and lower overall borrowing costs compared to conventional loans. Plus, there’s no private mortgage insurance required, which means lower monthly payments. And the cherry on top? You can use your VA loan benefit over and over again throughout your life as long as you meet the VA requirements. It’s a gift that keeps on giving.

Welcome Home Veteran Program 

For veterans and active duty military in Missouri, the Welcome Home Loan program is definitely worth checking out. It’s designed to help veterans and service members buy a home affordably in the Show-Me State.

Some highlights of the program include below-market interest rates, forgivable closing cost assistance up to $1,500, and up to 100% financing available. And if you’re a first-time homebuyer, or haven’t owned a home in the past 3 years, you can even combine the Welcome Home program with the Missouri First Place Loan program for additional assistance.

Veterans United Home Loans 

Veterans United is a lender that specializes in helping veterans and service members secure VA home loans. They’re known for their stellar customer service and support – they hold your hand through the entire process, from pre-approval to picking up your keys.

One unique thing about Veterans United is that they have a network of real estate agents, called Veterans United Realty, that specialize in working with military homebuyers. 

These agents understand the ins and outs of VA loans and the unique needs of veterans and service members. Working with a VU Realty agent and getting your VA loan through Veterans United can make for a seamless, stress-free experience.

Frequently Asked Questions About Military Home Loans 

Can you get a home loan in the military? 

Yes, active duty military members can absolutely get home loans, often with special benefits like no down payment, lower interest rates, and no mortgage insurance. VA loans are a popular option, but there are other programs like the Welcome Home Veteran program too.

Do military get better mortgage rates? 

In many cases, yes. VA loans backed by the Department of Veterans Affairs often have very competitive rates compared to conventional loans. Programs like the Welcome Home Loan in Missouri also offer below-market rates for veterans and service members.

What are the disadvantages of a VA loan? 

Overall, VA loans have significant advantages. But a couple potential drawbacks are the VA funding fee (though this can be rolled into the loan amount) and the fact that not all sellers will accept VA loan offers because of extra requirements. However, benefits like $0 down, low rates, and no mortgage insurance usually far outweigh the cons.

Final Thoughts 

As a veteran or service member, you have access to some phenomenal home loan programs that can make homeownership more affordable and accessible. Between VA loans, state-specific programs like Welcome Home Veteran, lender-specific options like Veterans United, and money-saving opportunities like the ARC rebate, you’ve got lots of great paths to explore.

Take some time to research the eligibility requirements and benefits of each, and don’t hesitate to reach out to lenders and realtors who specialize in working with military homebuyers. With the right program and team in your corner, you’ll be unlocking the front door of your new home in no time. Happy house hunting!

The real estate industry is on the cusp of a seismic shift that has been decades in the making, as a 6% commission in home purchase transactions no longer exists.

A landmark settlement between the National Association of Realtors (NAR), which represents 1 million realtors, and home sellers is set to dismantle long-standing policies that have been accused of artificially inflating agent commissions. The real estate agent commission settlement has far-reaching implications for home buyers, sellers, and the real estate professionals themselves, ushering in a new era of transparency and competition within the industry.

What is the National Association of Realtors Lawsuit?

At the heart of this legal battle is the NAR, a powerful trade group that has long governed the rules and regulations for real estate agents across the United States. 

For years, the NAR has faced scrutiny and multiple realtor lawsuits from home sellers who claimed that its policies regarding listings on the Multiple Listing Service (MLS) have unfairly propped up agent commissions. The issue lies in the NAR’s requirement that brokers advertising a home for sale on the MLS offer upfront compensation to a buyer’s agent. 

This practice, which has been in place since the 1990s, has been heavily criticized for stifling competition and forcing home sellers to pay inflated commissions to both their agent and the buyer’s agent.

How Will It Impact Real Estate Commissions?

In a sweeping move to resolve these lawsuits, the NAR has agreed to pay $418 million to compensate home sellers across the United States. However, the real game-changer is the organization’s decision to abolish the policies that have been at the center of the controversy.

Under the terms of the settlement, the NAR will no longer require brokers to offer upfront compensation to a buyer’s agent when advertising a home for sale on the MLS. 

Instead, individual home sellers will have the opportunity to negotiate such offers with a buyer’s agent outside of the MLS platforms. This shift in policy opens the door for increased competition and the potential for significant reductions in agent commissions.

Real Estate Commission Settlement Could Lead to Lower Home Buying Costs

Currently, the standard commission rate for real estate agents is typically in the range of 5% to 6% of the home’s sale price, with this cost being borne by the seller. With the new rules for buying and selling homes, analysts predict that agent commissions could drop by as much as 30%.

For example, if you’re selling a $1 million home under the current system, you could expect to pay approximately $60,000 in agent fees. However, with a 30% reduction in commissions, that same home sale could result in a savings of $18,000, with the total commission dropping to around $42,000.

This potential for substantial cost savings is not only beneficial for home sellers but could also make homeownership more accessible for prospective buyers. With lower agent fees factored into the overall cost of purchasing a home, many individuals who were previously priced out of the market may find themselves in a more favorable position to enter the housing market.

How This Can Impact the Housing Market

The implications of this realtors commission settlement on the broader housing market are multifaceted and complex. While predictions vary, there are several potential scenarios to consider.

On one hand, the prospect of lower commission rates could spur increased activity in the housing market. With the reduced costs associated with buying and selling homes, there may be an influx of new buyers entering the market trying to save money on a mortgage, driving up demand and potentially leading to an increase in home prices in certain areas.

With an increase in home prices, ARC Relocation’s Realtor Rebate can be useful to help save thousands on costs associated with buying or selling your home.

Conversely, some experts believe that the lower commissions could actually result in a decrease in home prices across the board. The reasoning behind this theory is that if sellers are paying less in realtor fee changes, they may be more inclined to accept lower offers on their homes, thereby driving down overall pricing. This is ideal for anyone purchasing their first home.

Regardless of the ultimate impact on home prices, one certainty is that the real estate industry as a whole will undergo a significant transformation. Real estate agents and brokers will need to adapt their business models and pricing strategies to remain competitive in a landscape where commissions are no longer fixed.

NAR Realtors Have Had Trouble For Years

It is important to note that the NAR’s legal troubles and scrutiny over its practices extend far beyond the recent settlement. For years, the organization has faced antitrust allegations and leadership turmoil, casting doubt on its ability to maintain a firm grip on the industry.

In November 2023, a federal jury in Missouri found the NAR and several large brokerages liable for a staggering $1.8 billion in damages for conspiring to keep agent commissions artificially high. 

Since it was an antitrust case, the NAR could have been on the hook for triple the damages, which is $5.4 billion.

This verdict, coupled with the potential for treble damages, served as a major blow to the NAR’s credibility and prompted the organization to seek a real estate agent commission settlement. Furthermore, the NAR has been plagued by leadership chaos over the past year, with multiple high-profile resignations and allegations of misconduct among its top executives. 

This instability has only added to the organization’s woes and may have contributed to its decision to seek a resolution to the ongoing legal battles.

Final Thoughts

The real estate industry is undoubtedly on the precipice of a transformative period with the recent NAR class action lawsuit update.

For home sellers, the potential for significant cost savings is a welcome development, allowing them to retain a larger portion of their home’s value. Prospective buyers, on the other hand, may find homeownership more attainable as the overall costs associated with purchasing a property become more affordable.

Real estate professionals, however, will need to adapt quickly to the changing landscape. In the end, the real estate agent commission settlement represents a pivotal moment for an industry that has long been resistant to change.

Purchasing a home is a significant financial milestone, and securing a mortgage is a crucial step in the process. To ensure a smooth and successful mortgage application, it’s essential to have all the necessary documents in order. 

This mortgage checklist will walk you through the various records you’ll need to provide, ensuring you’re well-prepared for this important endeavor.

Basic Application Information

The first thing on your home loan checklist is to have all of your basic information ready. To initiate the mortgage application process, you’ll need  to provide some fundamental information about yourself and the property you intend to purchase. 

This includes your full legal name, date of birth, social security number, and the address of the desired property. 

Additionally, you’ll need to specify your intended occupancy status – whether the property will serve as your primary residence, a second home, or an investment property. 

If you’re applying for the mortgage jointly with a co-borrower, such as a spouse or partner, you’ll need to provide the same basic information for them as well. 

It’s important to note that having a co-borrower can potentially strengthen your application, as lenders will consider both parties’ income, assets, and credit profiles.

Income Verification

One of the most important things on your mortgage application checklist is verifying your income and employment history. 

Lenders need to ensure that you have a stable and sufficient income stream to comfortably meet the monthly mortgage payments and that you can save money for a house. Here are the documents you’ll typically need to provide:

Paystubs

Lenders generally require your most recent paystubs covering the last 30 days. These documents provide a clear picture of your current income and pay frequency. They should also reflect any bonuses, commissions, or overtime pay you’ve received.

W-2 Forms

You’ll need to submit W-2 forms from the previous two years, which summarize your annual income and tax withholdings. These mortgage papers help lenders understand your income patterns and verify the information reported on your tax returns.

Federal Income Tax Returns

Be prepared to provide your most recent two years of federal income tax returns, including all schedules and forms. These home loan documents offer a comprehensive overview of your income sources and deductions, as well as any self-employment income or rental property income.

Child Support or Alimony

If you receive child support or alimony payments, you’ll need to provide documentation to verify these income sources, such as a court order or divorce decree.

Self-Employment Documentation

If you’re self-employed, you’ll need to submit two years’ worth of tax returns, as well as profit and loss statements, balance sheets, and any other documents that demonstrate a steady and consistent income from your business. 

Lenders may also require a year-to-date profit and loss statement to ensure your business is still performing well.

It’s crucial to provide accurate and complete income documentation, as lenders will closely scrutinize these records to assess your ability to make timely mortgage payments.

Credit History

Another important factor on your mortgage loan documents checklist is your credit score. Your credit score and credit history play a pivotal role in the mortgage approval process and the interest rate you’ll be offered. Lenders will obtain your credit report from one or more of the major credit bureaus (Experian, Equifax, and TransUnion) to assess your creditworthiness. 

It’s advisable to review your credit report before applying for a mortgage and address any errors or discrepancies that may exist.

While a higher credit score typically results in more favorable loan terms, lenders will also consider your overall financial picture, including your income, assets, and debt-to-income ratio. 

Even with a lower credit score, you may still qualify for a mortgage, but you may need to provide additional documentation or make a larger down payment.

If you have a thin credit file or limited credit history, lenders may request alternative forms of credit data, such as utility bills, rental payments, or other recurring payments, to gauge your financial responsibility. The same applies if you are applying for a mortgage rebate, which many lenders offer as an incentive for taking out a loan with them.

Spending, Expenses, and Debts

To gain a better understanding of your financial situation, lenders will evaluate your spending habits, existing debts, and overall financial obligations. Prepare for your mortgage checklist by providing the following documents:

Bank Statements

You’ll need to submit your most recent two to three months’ worth of statements for all checking, savings, and other asset accounts. These statements provide insight into your income and spending patterns, as well as your ability to save and manage your finances responsibly.

Retirement and Investment Account Statements

If you have retirement accounts (such as a 401k or IRA) or investment accounts, you’ll need to provide statements for these as well. Lenders view these accounts as potential sources of funds for a down payment or closing costs, as well as indicators of your long-term financial planning.

Debt Information

Provide details on any outstanding debts you have, including credit card balances, auto loans, student loans, and personal loans. Lenders will use this information to calculate your debt-to-income ratio, which is a key factor in determining your ability to take on additional debt in the form of a mortgage.

By reviewing your spending patterns and existing debt obligations, lenders can assess your ability to manage the additional financial responsibility of a mortgage payment while maintaining a healthy financial standing.

Other Records

Depending on your individual circumstances, you may need to provide additional mortgage documents. Here are some common examples:

Rental History

If you’re currently renting, your lender may request a rental history from your landlord or copies of canceled rent checks to demonstrate your ability to make consistent housing payments. 

This documentation can be especially helpful if you have a limited credit history or are looking to offset a lower credit score. Your lender wants to ensure you will make timely payments for your mortgage. You can even save money on your mortgage over time by making bi-weekly payments, something that doesn’t save you money when renting.

Divorce Decree

If you’ve been divorced, you’ll need to provide a copy of your divorce decree, especially if you’re responsible for alimony payments or child support. These financial obligations will be factored into your debt-to-income ratio and overall affordability assessment.

Purchase and Sale Agreement

If you’re selling your current home, you’ll need to provide a copy of the purchase and sale agreement. This document helps lenders understand the timeline and financial aspects of your home sale, which may impact your ability to obtain a new mortgage.

Identification for Non-Citizens

If you’re not a U.S. citizen, you’ll need to provide a valid form of identification, such as a green card or work visa, to verify your legal status and eligibility for a mortgage.

Alternative Credit Data

If you have a low credit score or a thin credit file, the lender may request alternative forms of credit data, such as utility bills, rental payments, or other recurring payments to assess your financial responsibility. This can help compensate for a limited traditional credit history.

Mortgage Checklist: FAQs

What documents do I need to apply for a mortgage?

The primary documents required for a mortgage application include:

• Identification (driver’s license, passport, etc.)
• Income verification (paystubs, W-2s, tax returns)
• Credit report
• Bank statements
• Proof of assets (investment/retirement accounts)
• Debt information (credit cards, loans, etc.)
• Rental history (if applicable)
• Divorce decree (if applicable)

How far back do I need to provide tax returns and bank statements?

Most lenders will require your most recent two years of tax returns and two to three months of bank statements. However, be prepared to provide additional years or months if requested by the lender.

Can I get a mortgage with a low credit score?

While a higher credit score generally results in more favorable loan terms, it is possible to obtain a mortgage with a lower credit score. However, you may need to provide additional documentation, such as alternative credit data or a larger down payment. 

Lenders may also require you to have a higher income or lower debt-to-income ratio to offset the increased risk associated with a lower credit score.

What if I’m self-employed?

If you’re self-employed, you’ll need to provide two years’ worth of tax returns, as well as profit and loss statements, balance sheets, and other documents that demonstrate a steady and consistent income from your business. 

Lenders need to verify that your income is stable and sufficient to support the mortgage payments. They may also request a year-to-date profit and loss statement to ensure your business is still performing well.

What if I’ve recently changed jobs or had a gap in employment?

If you’ve recently changed jobs or experienced a gap in employment, the lender may require additional documentation to verify your current income and employment status. 

This could include offer letters, employment contracts, or written explanations for any gaps in employment. The lender needs to ensure that your income is stable and reliable before approving your mortgage.

Final Thoughts

Making a mortgage checklist and gathering all the necessary documents can be a difficult process, but it’s essential to ensure a smooth and successful transaction. 

By being prepared and having all the required mortgage paperwork in order, you’ll be one step closer to achieving your dream of homeownership.

If you are in the process of looking to purchase a new home, ARC Relocation can help you save thousands with our Realtor Rebate. Whether you need assistance with selling or buying your home or shipping your belongings, ARC can help. Contact us at ARC Relocation today for more information. 

Are you a veteran or active-duty service member looking to buy a home? If so, you may be eligible for a VA loan – a VA mortgage option that can save you a significant amount of money throughout the home buying process. 

If you work with a company like ARC Relocation, you can potentially save even more through their realtor rebate program that puts cash back in your pocket after closing.

What Is a VA Loan?

A VA military home loan is a type of mortgage loan that is backed by the U.S. Department of Veterans Affairs (VA). It is designed to help active-duty military personnel, veterans, and eligible surviving spouses purchase homes with favorable terms and low-cost or no-cost options compared to traditional mortgages.

The VA does not directly lend money for these mortgages. Instead, private lenders like banks, credit unions, and mortgage companies issue the loans while the VA guarantees a portion of the loan amount. This guarantee protects lenders against losses if the borrower defaults, making them more willing to provide affordable financing to eligible borrowers.

Benefits of a VA Home Loan

VA loans offer several significant advantages over conventional mortgages, making them an attractive option for eligible borrowers looking to purchase a home. Here are some of the key benefits that can save you substantial money:

Closing Cost Limits

One of the biggest advantages of a VA loan is that the VA limits the amount of allowable closing costs that borrowers can pay. 

This cap on fees can save you thousands of dollars when compared to the closing costs associated with a traditional mortgage. Typical closing costs might include things like the lender’s origination fee, appraisal fee, credit report fee, and more.

Lower Interest Rates

VA loans typically offer lower interest rates than conventional mortgage loans. This lower rate can result in significant savings over the life of your loan. Even a slightly lower interest rate can translate to tens of thousands of dollars in savings for the borrower.

0% Down Payment

Perhaps the most attractive feature of a VA loan is that it does not require any down payment, as long as the sales price of the home is not higher than its appraised value. This allows qualified buyers to purchase a home without having to save up a substantial amount of money for a down payment, which can be a major barrier to homeownership for many.

Flexible Credit Guidelines

The VA has more flexible credit requirements and guidelines than many conventional lenders. While most lenders have strict credit score cutoffs, the VA takes a more holistic approach when evaluating a borrower’s creditworthiness. This makes it easier for those with less-than-perfect credit histories to qualify for a mortgage.

No Private Mortgage Insurance

With conventional mortgages, borrowers who make a down payment of less than 20% are typically required to pay private mortgage insurance (PMI). This insurance protects the lender in case of default but can add hundreds of dollars to your monthly mortgage payment. VA loans do not require any PMI, resulting in lower overall housing costs.

VA Loan Eligibility 

To be eligible for a VA home loan, you must meet specific service requirements set by the Department of Veterans Affairs. Your eligibility criteria and the VA loan requirements you must meet can vary depending on whether you are currently serving on active duty or are a veteran.

Veterans

If you are a veteran of the U.S. Armed Forces looking to move, you generally need to have served at least 181 days of active duty during peacetime or 90 consecutive days during wartime to be eligible for a VA loan. You must also have been discharged under conditions other than dishonorable.

However, there are some exceptions to these minimum service VA loan requirements. For example, if you were discharged due to a service-connected disability, you may still be eligible with less active duty time served.

Service Members

If you are currently serving on active duty in the military, you may be eligible for a VA loan after serving at least 181 continuous days. However, there are some additional VA loan requirements and exceptions based on your specific circumstances.

For example, you may be eligible after serving just 90 days if you were deployed or are a member of the National Guard or Reserves who served at least 90 days of active service during wartime. The VA also has special eligibility provisions for certain scenarios like being a prisoner of war or receiving a Purple Heart.

It’s important to note that eligibility requirements can change over time, so it’s best to consult with a VA-approved lender or the VA directly to determine if you meet the current service requirements.

How VA Loans Compare

While VA loans offer many benefits, it’s helpful to understand how they stack up against other popular mortgage options like conventional loans and FHA loans. Here’s a quick comparison:

VA loans typically offer lower VA home interest rates and more flexible credit requirements than conventional loans from banks and private lenders. Additionally, conventional loans require private mortgage insurance if you put down less than 20%, while VA loans never require PMI.

Compared to FHA loans, which are insured by the Federal Housing Administration and allow for low down payments, VA loans generally have lower overall costs. 

While FHA loans allow down payments as low as 3.5%, they require both an upfront mortgage insurance premium and ongoing annual premiums, which can add significant costs over the life of the loan. VA loans require no mortgage insurance at all.

Loan Type	Interest Rates	Credit Requirements	PMI Requirement	Overall Costs	Down Payment
VA Loans	Lower	More Flexible	No PMI	Generally Lower	Not specified
Conventional Loans	Higher	Less Flexible	PMI required if down payment is less than 20%	Varies	At least 20% to avoid PMI
FHA Loans	Varies	Varies	Upfront and annual premiums	Higher due to premiums	As low as 3.5%

This table provides a clear comparison of key features such as interest rates, credit requirements, PMI (Private Mortgage Insurance) requirements, overall costs, and down payment expectations for each loan type.

In many cases, VA loans can be the most affordable mortgage option available – especially for those with lower credit scores or limited funds for a down payment. 

Types of Veteran Loans

The VA offers several different types of home loans to meet the diverse needs of eligible borrowers. Here’s an overview of some of the most common VA loan options:

VA Interest Rate Reduction Refinance Loan

This type of VA loan, sometimes called a VA Streamline Refinance, allows homeowners who already have an existing VA loan to refinance their mortgage to take advantage of lower interest rates. The IRRRL typically involves less documentation and underwriting than a standard refinance.

An IRRRL can potentially lower your monthly mortgage payments and save you thousands over the life of the loan by securing a lower interest rate. However, you cannot take cash out with this refinance option.

VA Purchase Loan

The VA Purchase Loan, often referred to as a VA home loan, is the most widely used type of VA loan. As the name implies, this loan is used to finance the purchase of a primary residence for eligible borrowers.

With a VA Purchase Loan, qualified buyers can finance up to 100% of the home’s value with no down payment required, as long as the purchase price doesn’t exceed the appraised value. The VA also caps certain closing costs that the borrower is allowed to pay.

VA Energy Efficient Mortgage

The VA Energy Efficient Mortgage (EEM) is designed to allow veterans to finance the cost of energy efficiency improvements into their VA loan. This option is available for both VA Purchase Loans and VA Refinance Loans. 

The EEM can cover various upgrades, such as installing energy-efficient windows, insulation, or heating and cooling systems, which can ultimately save homeowners on their utility bills and contribute to environmental conservation.

VA Cash-Out Refinance

The VA Cash-Out Refinance Loan is another valuable option that allows veterans to refinance their existing non-VA loan into a VA loan and extract cash from the home’s equity. 

This can be used for various purposes like home improvements, debt consolidation, or other financial needs. It offers the benefits of a standard VA loan, such as competitive interest rates and no requirement for PMI.

How a Realtor Rebate Can Help

While VA loans already offer significant savings for eligible buyers, working with a company that provides a realtor rebate program can help you save even more money on your home purchase. The ARC Relocation Realtor Rebate Program puts cash back in your pocket after closing when you work with one of their pre-screened real estate agents.

Here’s how it works: After your home purchase is finalized, ARC Relocation will issue you a cash rebate that is a percentage of the total purchase price of the home. The exact rebate percentage can vary based on the specifics of the transaction, but rebates typically range from around 1% to 2% of the sales price.

Example of the ARC Realtor Rebate Program

Imagine you’re a veteran who has just purchased a home for $300,000 using a VA loan, and you’ve decided to work with ARC Relocation’s realtor rebate program. Let’s say the rebate percentage offered by ARC Relocation is 1.5% of the purchase price.

Here’s a simple breakdown of how the rebate would work:

• Home Purchase Price: $300,000
• Realtor Rebate Percentage: 1.5%
• Rebate Amount Calculation: $300,000 (purchase price) * 1.5% (rebate percentage) = $4,500

After the closing of your home purchase, ARC Relocation provides you with a rebate of $4,500. This amount can be used for any purpose, whether you want to furnish your new home, apply it towards your mortgage, or save it for future expenses.

The USAA Movers Advantage Program offered cash rewards to military customers and families to help them save money on moving, but it no longer exists. ARC Relocation’s Realtor Rebate Program replaces the USAA Movers Advantage Program. 

It is an extra benefit on top of the VA loan advantages, enhancing your financial flexibility and providing additional savings after you’ve secured your new home. 

VA Loan Requirements: FAQs

Do I need to be a first-time homebuyer to qualify for a VA loan?

No, VA loans are available to eligible borrowers regardless of whether they are first-time homebuyers or have owned a home in the past. The program is intended to support affordable homeownership for those who have served or are serving in the military.

Can I use a VA loan to purchase a vacation home or investment property?

No, VA loans can only be used to finance the purchase of a primary residence that will be occupied by the borrower. Investment properties and vacation homes do not qualify.

Can I have more than one VA loan at the same time?

Yes, in some cases it is possible to have multiple VA loans simultaneously if you still have remaining loan entitlement. However, the combined loan amounts cannot exceed the total entitlement amount, which is typically tied to the county loan limits.

Do I need to pay a funding fee for a VA loan?

The VA charges a funding fee on most VA loans to help defray the program’s costs. This upfront fee varies based on your type of service, down payment amount (if any), and whether this is your first VA loan or a subsequent one. Many borrowers opt to roll the funding fee into their overall loan amount.

Final Thoughts

VA loans offer a suite of benefits that can make home ownership more accessible and affordable for veterans and active-duty service members. With features like no down payment and no PMI, along with the potential for lower interest rates and flexible credit requirements, VA loans can be an excellent choice for eligible borrowers. 

By understanding the variety of VA loan options, VA loan requirements, and leveraging additional benefits like realtor rebates, veterans can maximize their advantages and enjoy a smoother, more cost-effective path to homeownership.

If you are a veteran planning a move, ARC Relocation can help. We at ARC Relocation can help plan your move and help you transition smoothly into the next chapter of your life. 

To learn more about how ARC can help you save thousands on the purchase of your home, contact us today or register for our realtor rebate program. 

Buying a home is a massive financial commitment, and every little bit of savings counts. That’s where a mortgage rebate (also known as a lender rebate or rebate loan) can come in handy. 

It’s a way for you to get some cash back when you take out a mortgage loan. With housing costs continuously on the rise, an opportunity like a mortgage cashback is a great way to save money and reduce expenses.

Are you trying to save thousands on the purchase of your new home? Register for the ARC Realtor Rebate program and save tons of money on closing costs!

What Is a Mortgage Rebate?

A mortgage rebate is a cash rebate or credit that a lender offers to a borrower as an incentive for taking out a mortgage loan with them. It’s essentially a discount on the loan, which can help offset some of the closing costs or other expenses associated with buying a home, like saving money on your down payment. 

Mortgage rebates are sometimes offered by lenders as a way to attract more borrowers and stay competitive in the mortgage market.

How Does a Mortgage Rebate Work?

When you apply for a mortgage, the lender may offer you a rebate as a way to entice you to choose their loan product. The rebate amount is typically a percentage of the total loan amount, and it’s credited to you at closing. 

For example, if you’re taking out a $300,000 mortgage and the lender offers a 1% rebate, you’d receive $3,000 back at closing.

It’s important to note that while a mortgage rebate can save you money upfront, it may also come with a slightly higher interest rate or other fees attached to the loan. 

Lenders need to make up for the cost of the rebate somewhere, so it’s not entirely free money. However, in many cases, the overall savings from the rebate can still make it a worthwhile option.

What Is an Example of a Mortgage Rebate?

Let’s say you’re buying a $400,000 home with a 20% down payment ($80,000). Your mortgage amount would be $320,000. If the lender offers a 1.5% rebate, you’d get $4,800 back at closing (1.5% of $320,000). That’s a nice chunk of change that could go towards closing costs, moving expenses, or even just padding your bank account.

Imagine being able to put that $4,800 towards your moving costs, or using it to buy some new furniture for your new home. It could also serve as a buffer in case of any unexpected expenses that pop up during the moving process. Every little bit of extra cash can make a significant difference when you’re dealing with the financial strain of a home purchase.

Why Is a Mortgage Rebate Helpful?

A mortgage rebate can be super helpful for a few reasons:

• It reduces your upfront costs when buying a home, which is always a plus when you’re dealing with a major purchase like this. Closing costs alone can easily run into the thousands of dollars, so any way to offset those expenses is beneficial.
• It can help offset closing costs, which can include things like appraisal fees, title insurance, and other miscellaneous charges.
• It gives you a little extra cash to work with, which can come in handy for things like hiring movers, buying new furniture, or just having a financial cushion. The costs associated with moving and settling into a new home can add up quickly, so having that extra cushion can provide peace of mind.
• It can help make your monthly mortgage payments more affordable, especially in the early years when a larger portion of your payment goes towards interest.
• It can make homeownership more accessible for first-time buyers or those with limited budgets.

While a mortgage rebate may not seem like a game-changing amount of money, every little bit of savings can make a difference when you’re taking on such a significant financial responsibility.

Alternatives to a Mortgage Rebate

While a mortgage rebate is a great way to save some money, it’s not the only option out there. Another option to consider is the ARC Relocation realtor rebate program. With this program, you can receive a cash rebate from your realtor after your home purchase is complete. 

The rebate amount is based on a percentage of the sale price, so the higher the home’s value, the bigger the rebate you’ll receive. It’s a great way to save thousands of dollars on closing costs and other expenses.

The ARC Relocation rebate program is especially beneficial for those who are relocating for work or other reasons, as it can help offset some of the additional costs associated with a long-distance move. Plus, working with a realtor who is familiar with the relocation process can make the entire experience smoother and less stressful.

It’s a great alternative to the Community Heroes Rebate Program too, which can also help you save money when purchasing or selling your home. This is specifically for those who serve their communities, like firefighters, military members, healthcare workers, EMS workers, or those who work in law enforcement. 

Mortgage Rebate: FAQs

Are mortgage rebates taxable?

In most cases, yes. The rebate is generally considered taxable income, so you’ll need to report it on your tax return. However, it’s always a good idea to consult with a tax professional to understand the specific implications for your situation.

Do all lenders offer mortgage rebates?

No, not all lenders offer rebates. It’s typically up to the individual lender’s discretion, and some may use it as a promotional tool or a way to stay competitive in the market.

Can I negotiate for a higher rebate?

It’s worth asking, but the lender may or may not be willing to increase the rebate amount. They’ll likely have set guidelines and criteria for the rebate offers.

Are there any restrictions or requirements for receiving a mortgage rebate?

Yes, there may be certain criteria you need to meet, such as a minimum credit score, down payment amount, or debt-to-income ratio.

Can I use the rebate for anything, or are there limitations?

In most cases, you can use the rebate however you’d like, but it’s always a good idea to clarify with your lender. Some lenders may require that the rebate be applied towards closing costs or other specific expenses.

Final Thoughts

A mortgage rebate can be a nice little bonus when you’re taking out a home loan. It’s essentially free money that can help offset some of the costs associated with buying a home. 

Don’t forget to explore other options too, like the ARC Relocation realtor rebate program, which can potentially save you even more money in the long run.

Taking advantage of programs and loan incentives like mortgage rebates or realtor rebates can make the home buying process a little less daunting and help you keep more of your hard-earned money in your pocket.

If you want to save as much money as possible on your home purchase, register today for ARC Relocation’s Realtor Rebate Program. 

Buying a home is one of the biggest investments most people make in their lifetime, and the mortgage that comes with it can be a massive financial burden. Don’t worry though, there are plenty of strategies you can use to save money on your mortgage and keep more cash in your pocket. 

From shopping around for the best rates to making smart payment choices, we’ve got you covered with 11 effective tips on how to save money on a mortgage. Follow these strategies, and you could potentially save tens of thousands of dollars over the life of your loan.

1. Shop Around For a Loan

When it comes to mortgages, not all lenders are created equal. Interest rates, fees, and terms can vary widely, so it pays to do your homework. Get quotes from at least three different lenders – banks, credit unions, online lenders, and mortgage brokers – and compare the offers side by side. 

Don’t just focus on the interest rate; look at the annual percentage rate (APR) which factors in fees, as well as closing costs, origination charges, and any other lender fees. Even a small difference in rates or fees can add up to major savings over 15, 20, or 30 years.

As you shop, be sure to get pre-approved, not just pre-qualified. Pre-approval means the lender has verified your credit, income, assets, etc. and actually approved you for a specific loan amount, giving you more bargaining power with sellers. Pre-qualification is just a basic eligibility check.

2. Increase Your Down Payment

The best thing you can do when figuring out how to save interest on a mortgage is to increase your down payment. The more you can put down upfront, the less you’ll have to borrow, and the more you’ll save in interest charges over time. Aim for a downpayment of at least 20% to avoid paying private mortgage insurance (PMI), which can add hundreds to your monthly payment. 

If you can swing an even larger down payment, like 30% or more, you’ll save even more in the long run and may qualify for better interest rates too.

It’s wise to start saving early and make your down payment fund a priority. Cut any non-essential expenses, get a side gig, or look into down payment assistance programs that can help you reach that 20% threshold faster. The upfront investment will be well worth it in interest savings.

3. Negotiate

Don’t be afraid to negotiate with lenders. They want your business, and a little friendly haggling can go a long way. Come armed with the best quotes you’ve received elsewhere and ask them to beat the fees and rates. You can also request that certain costs, like loan origination fees, are waived entirely.

Be persistent yet respectful, and don’t be afraid to say “no” and walk away if a lender refuses to budge. There are plenty of options out there. Negotiating for a lower rate of just 0.25% can save you thousands upon thousands over a 30-year mortgage.

4. Wisely Utilize Your Home’s Equity

If you’ve built up substantial equity in your home, either through your down payment, mortgage payments over time, or rising property values, you may be able to tap into that equity to save money. 

Refinancing to a lower interest rate, shortening the term of your existing loan, or taking out a home equity loan or home equity line of credit (HELOC) could make sense in some situations.

Just make sure you carefully calculate the costs of any new loan, including closing costs, fees, etc. And be realistic about whether you can comfortably afford any new payments. Home equity is a powerful tool for saving for a mortgage, but only if you utilize it wisely.

5. Make Bi-Weekly Payments

Instead of making a single monthly payment, consider making half-payments every two weeks. Over the course of a year, you’ll end up making the equivalent of 13 full monthly payments instead of just 12, which can shave years off your mortgage term and save you thousands in interest charges.

For example, on a $250,000 mortgage at 4.5% interest over 30 years, switching to bi-weekly payments would save you over $30,000 in interest and allow you to be mortgage-free almost 5 years sooner. Most lenders will gladly accommodate this payment schedule, but be sure to confirm there are no additional fees involved.

Another option is to simply set up automatic bi-weekly half-payments online through your bank’s bill pay service. This accomplishes the same goal in a more hands-off way.

6. Get a Realtor Rebate

When you buy a home through ARC Relocation’s Realtor Rebate program, you can get a cash rebate of up to 1% of the purchase price after closing. 

That means if you buy a $400,000 home, you could pocket up to $4,000 to put towards your mortgage principal, closing costs, or even new furniture and home improvements. It’s an easy, no-hassle way to save big money right from the start.

The rebate program is available in most states across the U.S. Simply register on ArcRelocation.com before your home search begins. ARC’s Partner Agents are top-rated in their local markets and will provide the same expert service as any other realtor. Earn cash back while getting a great agent – it’s a win-win!

7.  Pay Down Principal Regularly

Even small extra payments applied directly to your mortgage principal each month can make a huge difference over time. If you can swing an extra $100 or $200 per month, you’ll shave years off your loan term and save a bundle in interest charges. Many lenders allow you to easily set up automatic extra principal payments online.

Or, you could follow a strategy like making one extra mortgage payment per year, whether that’s with your tax refund, a year-end bonus, or some other financial windfall. The key is to ensure those additional funds are applied to the principal only rather than being spread across the next several payments.

Over 30 years, paying just $100 extra per month could save you over $60,000 in interest on a $300,000 mortgage! It’s one of the most powerful tactics for accelerating your payoff and avoiding excessive interest.

8. Avoid Private Mortgage Insurance (PMI)

As mentioned earlier, if your down payment is less than 20%, you’ll likely have to pay private mortgage insurance premiums, which can add hundreds to your monthly costs. PMI premiums are designed to protect the lender in case of default, but they provide no benefit to you as the borrower.

Once you’ve built up 20% equity in your home through payments and/or appreciation, be sure to promptly ask your lender to remove the PMI – you shouldn’t have to keep paying those premiums anymore at that point. Setting a calendar reminder can help you stay on top of this potential money-saver.

9. Get an Energy Efficient Mortgage

Some lenders offer special “green” mortgages that factor in the cost savings of an energy-efficient home. You may be able to qualify for a larger loan amount based on the anticipated utility bill savings, making that pricier but more eco-friendly dream home a little more affordable.

Alternatively, you could receive a bigger tax credit for an energy efficient mortgage or property. These programs make a lot of sense given that the upfront costs of solar panels, HVAC upgrades, etc. will pay off through lower utility costs month after month. Be sure to ask your lender about energy-efficient mortgage options.

10. Improve Your Credit Score

If you want to know how to save on mortgage interest, improve your credit score. Raising your credit score, even by just a few points, could help you qualify for a much lower mortgage interest rate that saves you thousands over the life of the loan. 

With good credit, lenders view you as less of a risk and reward you with their best terms and pricing. 

When you have good credit, you won’t need to worry if you are ever in a situation where you need to sell your house fast for relocation. A good credit score will make the process much smoother when it comes to purchasing your new home. 

Pay down credit card balances to less than 30% of your total credit limits. Remove any errors or derogatory items from your credit reports. Avoid opening new credit accounts before applying for a mortgage. And make all debt payments on time, every time – payment history is the biggest factor impacting your scores.

In general, a FICO score in the mid-700s or higher will get you the most attractive mortgage rates and terms. A score over 800 is considered excellent. Every 20-point increase in your score could translate to tens of thousands of dollars in savings.

11. Buy Within Your Means

Another way how you can save money on your mortgage is to buy within your means. While mortgage lenders will often qualify you for your absolute maximum borrowing potential based on your income, debts, and credit, don’t automatically take out the largest loan amount you can get approved for. That leaves you financially stretched razor thin with little margin for error.

Instead, consider getting a more modest mortgage on a less expensive home that you can truly afford comfortably. Lenders don’t factor in other monthly expenses like utilities, gas, groceries, etc. when calculating your mortgage eligibility. Those costs add up quickly on top of your new mortgage payment.

Stretching your housing budget to the absolute limit also leaves you “house poor” with little leftover income for retirement savings, college funds, travel, and other life priorities. You’ll likely struggle to stay current on all bills and maintenance, risking foreclosure.

It’s wise to build in ample breathing room by buying a home that costs less than the priciest one a lender approves you for. Look for a payment of no more than 25% of your take-home pay. Modest housing costs = financial peace of mind.

How to Save Money On a Mortgage: FAQs

How much should I put down on a house?

While the minimum downpayment is usually just 3-5% for FHA, VA and some conventional loans, experts recommend putting down 20% if possible. 

A 20% downpayment gets you out of paying private mortgage insurance premiums and lowers your overall borrowing costs. If you can swing 25% or more, even better – the larger the downpayment the lower your long-term interest costs.

Is it worth refinancing my mortgage?

Refinancing can be beneficial if you can lower your interest rate by at least 0.75-1% and plan to stay in the home long enough to recoup the closing costs. 

Those costs can run 2-5% of your loan balance, so calculate your break-even point carefully. Also consider if you want to change your loan term or type of mortgage. A refinance calculator can help you run the numbers.

Can I deduct mortgage interest on my taxes?

Yes, you can deduct the interest paid on up to $750,000 of qualifying mortgage debt (or $375,000 if married filing separately) if you itemize deductions on your tax return. 

This can provide significant tax savings, especially in the early years of your mortgage when more of each payment goes toward interest rather than principal. Check with a tax pro, as rules do change periodically.

What is an escrow account and do I need one?

Most lenders require that you pay a portion of your property taxes and homeowners insurance premiums into an escrow account each month along with your mortgage payment. 

The lender then pays those bills from the escrow funds when they come due. This prevents a large lump sum payment from being due each year. While not strictly required, escrow accounts help protect the lender’s collateral.

Do I need mortgage protection insurance?

Mortgage protection insurance, also called mortgage life or disability insurance, can cover your mortgage payments if you lose your job, become disabled, or pass away unexpectedly. These policies are optional but can provide valuable peace of mind for families, especially if money is tight or you’re the sole breadwinner.

Final Thoughts

Buying a home and financing a mortgage is a major financial commitment requiring diligent preparation. But being a savvy borrower can help you snag a better deal upfront and save tens of thousands of dollars over the long run. 

From shopping lenders to making smarter payment choices, don’t overlook opportunities to shave years off your loan and keep substantial sums in your pocket.

If you want to know how to save money on a mortgage, following these 11 tips can help. Register for the ARC Realtor Rebate program to help you save thousands on the purchase of your home. 

Purchasing a home is a significant milestone in many people’s lives, but the prospect of saving for a down payment can be daunting. However, with careful planning and disciplined saving habits, you can turn this dream into a reality. 

In this comprehensive guide, we will explore effective strategies to help you save for a house down payment. By following these steps on how to save up for a house, you’ll be well on your way to owning your dream home.

How to Save For a Down Payment: How Much Do You Need to Save?

Before you embark on your savings journey, it’s crucial to determine how much you need to save for a down payment. This will depend on several factors, including the purchase price of the home, the mortgage loan’s terms, and the down payment percentage required by lenders. 

It’s generally recommended to aim for a down payment of 20% of the home’s purchase price to avoid private mortgage insurance (PMI). 

However, depending on your circumstances, you may be able to secure a mortgage with a lower down payment. It’s essential to evaluate your financial situation, consult with lenders, and understand your options. 

By calculating your target down payment amount accurately, you can establish a clear savings goal.

How Long Should You Plan to Save?

Once you have a clear understanding of the amount you need to save, it’s time to establish a timeline. Saving for a house is a long-term goal, and it’s important to set realistic expectations when learning how to save money for a down payment. 

Assess your current financial situation, including your income, expenses, and debt obligations. Analyzing your monthly cash flow will give you an idea of how much you can save each month. 

Here is a table that breaks down how much you can save based on the amount you save and time you have:

Savings Amount per Month	Years to Save	Total Savings Amount
$25	5	$1,500
$100	5	$6,000
$250	5	$15,000
$500	5	$30,000
$750	5	$45,000
$1,000	5	$60,000
$25	10	$3,000
$100	10	$12,000
$250	10	$30,000
$500	10	$60,000
$750	10	$90,000
$1,000	10	$120,000

 

Consider the desired timeline for homeownership and how it aligns with your financial goals. Understanding the relationship between time and savings will help you set achievable milestones and track your progress. 

Additionally, keep in mind that the longer you save, the more time you have to take advantage of potential market appreciation and interest on your savings.

8 Ways How to Save Up For a House

Here are eight of the most popular ways to start stacking more change for that big down payment: 

1. Create a Budget

Implementing a budget is the foundation of effective savings. Start by tracking your income and expenses to get a clear picture of your financial situation. Categorize your expenses and identify areas where you can reduce spending.

Look for opportunities to trim unnecessary costs such as dining out, entertainment subscriptions, or impulse purchases. 

By having a comprehensive overview of your finances, you can make informed decisions on where to allocate funds towards your down payment savings. Use tools like Mint or Rocket Money to help you track all of your personal spending and savings. 

2. Reduce Unnecessary Expenses

While it might seem obvious, you probably need to spend less if you want to save more. In addition to creating a budget, it’s important to scrutinize your expenses and identify areas where you can make significant cuts. 

Evaluate your monthly bills and look for alternatives to reduce costs. Consider negotiating lower interest rates on credit cards or refinancing high-interest loans. Explore options for lowering utility bills by adopting energy-saving habits or switching to more efficient appliances. 

Every dollar you save on unnecessary expenses can be directed towards your down payment fund.

3. Increase Your Income

For some of us, we can’t sacrifice the things we love and if that’s the case for you, you’re going to have to find a way to make more money if you want to buy a house. Boosting your income is a powerful way to accelerate your savings progress. 

Explore opportunities to increase your earnings, such as taking on a side hustle or freelancing.

Consider leveraging your skills or hobbies to generate additional income. Additionally, you can explore the possibility of negotiating a raise or promotion at your current job. Alternatively, investing in your education or acquiring new certifications can open doors to higher-paying opportunities in your field.

4. Automate Your Savings

When working on how to save up for a house, setting up automated savings is an effective way to ensure consistent contributions to your down payment fund. 

Open a separate savings account dedicated solely to your down payment savings. Speak with your bank or financial institution to establish automatic transfers from your checking account to your savings account. 

This “set it and forget it” approach eliminates the temptation to spend the money and ensures that a portion of your income is consistently directed towards your down payment goal. By automating your savings, you’ll make saving a habit without the need for constant manual transfers.

5. Cut Housing Costs

Housing expenses typically account for a significant portion of one’s monthly budget. Consider ways to reduce your housing costs to free up more money for your down payment savings. One option is to downsize your current living situation. 

Assess whether you can comfortably live in a smaller space or explore affordable housing alternatives. 

Additionally, consider finding a roommate to share rent and utility costs. Splitting expenses can significantly reduce the financial burden and accelerate your savings progress.

6. Save Windfalls

Take advantage of unexpected windfalls and channel them directly into your down payment fund. This can include tax refunds, work bonuses, or monetary gifts from family and friends. 

Instead of treating windfalls as disposable income, view them as an opportunity to make substantial contributions to your savings. 

By resisting the urge to splurge and redirecting these unexpected funds towards your down payment, you’ll make significant strides towards achieving your homeownership goal.

7. Get a Realtor Rebate

When purchasing a home, consider leveraging a realtor rebate program to save money on your real estate purchase. 

A realtor rebate is a cash incentive provided by a real estate agent or brokerage to buyers at closing. This rebate is typically a percentage of the agent’s commission and can be a substantial amount. 

By working with a realtor who offers a rebate program, you can receive a portion of the commission as a cash-back rebate, which can be directed towards your down payment. 

At ARC Relocation, we offer a realtor rebate that beats the competition. Our rebates are higher, we have a large realtor network, and we’ll match any rebate you find! Click here to register today! 

8. Explore Down Payment Assistance Programs

When working on how to get a down payment for a house, there are many local, state, and federal programs that provide down payment assistance to eligible homebuyers. These programs offer grants, loans, or tax credits to help individuals and families overcome the hurdle of saving for a home. 

Research available down payment assistance programs in your area and determine whether you meet the requirements. The application process may involve income verification, attending homebuyer education courses, or meeting specific criteria. By leveraging these programs, you can significantly reduce the amount you need to save on your own.

How to Save For a Down Payment On a House: FAQs

How long will it take to save for a down payment?

The timeline for saving for a down payment can vary significantly depending on factors like your income, savings rate, target down payment amount, and more. Generally, it takes most people 3-5 years to save enough for a 20% down payment. The more you can dedicate to savings each month, the faster you’ll reach your goal.

What percentage down payment do I need?

While 20% is recommended to avoid paying for private mortgage insurance (PMI), you can get a mortgage with as little as 3% down. However, the lower your down payment, the more fees and higher interest rates you’ll typically pay over the life of the loan.

Are there any programs to help with my down payment?

Yes! There are various down payment assistance programs and relocation loans available at the state, local, and national level that provide grants, forgivable loans, or tax credits to eligible homebuyers. Your income, credit, and other personal factors determine qualification. Reach out to your state and local housing authority to learn about opportunities for down payment help in your area.

Should I save for a down payment or pay down debts first?

It’s generally wise to pay down high-interest debts before dedicating all extra funds to a down payment savings account. This helps improve your credit score and debt-to-income ratio so you can qualify for better mortgage rates. Once high-interest debts are paid off, focus on saving aggressively for your down payment goal.

Final Thoughts

Learning how to save up for a house requires discipline, patience, and commitment. It may seem like a daunting task, but with the right strategies and a clear plan, you can achieve your goal. Remember that saving for a down payment is a long-term endeavor, and it’s essential to stay focused and motivated along the way.

Start by calculating your target down payment amount and establishing a realistic timeline based on your financial situation. 

Implement the strategies mentioned in this guide, such as creating a budget, reducing unnecessary expenses, increasing your income, automating savings, cutting housing costs, saving windfalls, exploring realtor rebate programs, and researching down payment assistance programs.

If you want to save the maximum amount of money on your home purchase, register now for the ARC Realtor Rebate program!