Written by:
Dave Suggs – Loan Advisor – (913) 481-1082
Live in Kansas? Are you looking to buy a home and wondering how you can save money on your down payment? Well, you are in luck because Kansas has specific programs that can help you buy a home with little down. We will touch on some federal programs, state-specific programs, as well as a few county-specific programs.
Helpful Terms to Know
Seller Concessions: Seller concessions refer to the seller covering a portion or all of the buyer’s closing costs and prepaids. This arrangement can be used to alleviate the buyer’s immediate financial burden and facilitate their ability to submit an offer on a property.
Closing Costs: Closing costs encompass the expenses associated with obtaining a mortgage. These expenses may include items such as underwriting fees, appraisal costs, charges for credit reports, and fees related to title services. Closing costs are typically settled at the closing of the property purchase and can be the responsibility of either the buyer or the seller.
Prepaids: Prepaids are payments made in advance that are necessary to complete a property purchase. Examples of prepaids include prepayment for one year of homeowners insurance, the establishment of an escrow account for taxes, and prepayment for insurance coverage.
Cost Breakdown Example:
Purchase price: $250,000
Estimated Closing Costs and prepaids $6,000
Down payment Amount Due at Closing $7,500
Total Funds Due At Closing $13,500
Cost Breakdown with Seller Concessions:
Loan Amount after 3% down $242,500
Total Cash Due at Closing (prepaids/down payment) $13,500
Less Seller Concessions – $6,000
Total Funds Due At Closing $7,500
Many customers use their checking/savings, 401k, retirement accounts, income tax refund, gift funds from a friend or relative, or down payment assistance – which we will go more in-depth on below – to cover the $7,500 cash required due at closing.
How Seller Concessions Work:
As you can see, seller concessions can really help a buyer when it comes to cash needed at closing. In the scenario above, the seller will need to agree to pay for the buyer’s closing costs and prepaids in part or all of the $6,000. In our example, the seller will take less to pay for the buyer’s closing costs.
Federal-Sponsored Loan Programs
There are government-supported home loan programs available to assist prospective homebuyers in purchasing a property with minimal or no down payment. In this article, we will focus on two primary options: VA loans and USDA loans. Each of these loan programs employs distinct strategies to facilitate zero-down home purchases.
VA Home Loans
The U.S. Department of Veterans Affairs (VA) plays a pivotal role in aiding Veterans, surviving spouses, and active service members in their pursuit of homeownership. VA home loan initiatives facilitate the full financing of a home’s purchase price at a fixed interest rate. Additionally, incorporating seller concessions into the real estate purchase offer empowers the buyer to arrive at the closing table with minimal to no cash outlay. It’s worth noting that Homestead Financial Mortgage extends the courtesy of waiving lender fees for Veterans.
VA home loan programs are accessible to eligible Veterans of the U.S. Armed Forces, contingent upon their honorable discharge status and possession of an acceptable Certificate of Eligibility (COE). Homestead Financial Mortgage takes great pride in its status as an approved VA lender. If you seek a comprehensive understanding of the prerequisites for securing pre-approval for a VA loan, check out the requirements to get pre-approval for a VA loan.
To achieve a nearly zero-down payment scenario, the involvement of seller concessions is essential for covering the buyer’s closing costs and prepayments.
United States Department of Agriculture (USDA)
The United States Department of Agriculture (USDA) also offers a commendable mortgage program. Despite its name, it is important to dispel any misconceptions – this program is not designed for agricultural purposes. Instead, it serves as a sponsored mortgage program for individuals seeking to reside in eligible rural areas while meeting specific income criteria.
Similar to VA loans, USDA loans enable 100% financing of the purchase price. However, unlike VA loans, what sets USDA loans apart is their capacity to include closing costs within the mortgage.
Prospective USDA buyers aiming to secure a property with little or no down payment can pursue seller concessions or opt to fold the closing costs and prepayments into the mortgage.
USDA mortgages have specific geographical and income limitations. These loans are predominantly accessible in rural areas, with certain regions near more densely populated areas also qualifying. It’s advisable to conduct research to pinpoint the exact USDA-eligible areas near you. Furthermore, USDA loans come with household income restrictions, which can be explored in greater detail here.
To learn more about designated USDA-eligible regions, check those out here.
State-sponsored Programs
Kansas DPA Down Payment Assistance
Kansas has a state-sponsored program that assists individuals who meet income requirements (these differ per county) and who are purchasing a home that is located in an approved area. Homebuyers can receive up to a percentage in down payment assistance in the form of a grant. You will work with an approved lender like Homestead Financial Mortgage to receive a 30-year, fixed-rate mortgage, FHA, VA, USDA, or Conventional loan.
Per KansasDPA, the minimum credit score is 640. If you’d like to read more about the program and income requirements, head to www.kshap.org.
First Time Home Buyers
The State of Kansas first-time homebuyers program provides down payment assistance to qualified Kansas buyers for the purchase of their first home.
Kansas Assistance Programs by City/Town
Lawrence – homeownership assistance programs through a partnership of the City of Lawrence and Tenants To Homeowners
Leavenworth – First Time Home Buyer Assistance Program
Topeka – Home Buyer Assistance Program (Topeka Opportunity To Own)
How do I find out if I qualify?
To find out if you qualify for Kansas down payment assistance, try to get your credit at or above 640, research the USDA loan areas, and find a good lender who is an expert in these programs! Buying a home can be a big financial move, likely one of the biggest of your life. While grants and taxes can be confusing – our expert loan officers in Kansas are available to help you understand all your options and answer all your questions throughout your homebuying journey.