For many potential home buyers, the biggest issue is the down payment. There are several options for people to buy with zero down or very low down payments. Some do not require that you are a first time homebuyer either!
For those with no money, there are two programs:
VA loans – you must have served on active duty or have enough time in the reserves to qualify for VA benefits. VA loans do not require any money down and do not have amonthly mortgage insurance payment at all – there is a VA funding fee that can be rolled into your mortgage. If you have any VA related disability, the VA funding fee may be cut or even waived completely!
USDA rural housing – These are also zero down loans that are available to those buying outside the metro area. There are income limits for those using this program, they vary based on the area median income and the number of people in the household. There is an annual guarantee fee (.50%) paid monthly and an 2.75% guarantee fee added to your mortgage. The monthly fee does not go away, but is less than FHA's fee.
Programs with minimum down:
FHA is one of the most popular programs, requiring 3.5% down. The down payment can be a gift from a family member, so that may help you purchase a home soon than you were hoping. There is an upfront mortgage insurance premium added to your mortgage of 1.75% and a monthly payment of .85%. The monthly fee does not go away on FHA loans.
Conventional loans have a couple 3% down programs. Fannie Mae just revised their My Community program and it's now called the Home Ready Program. This allows you to get gift money or down payment assistance to purchase a home.
Conventional loans are also available at 3% down up to a mortgage amount of $417,000. The mortgage insurance is higher on this program than FHA, but it will go away after you have enough equity in the home. With low interest rates, this may be a program to consider.
For first time homebuyers, you may be able to qualify for down payment assistance. Typically you need at least $1000 into the transaction and depending on the program the down payment assistance may be a deferred 2nd mortgage – meaning you do not pay it back until you sell the home or pay off the original loan. There are many different programs available depending on where you are buying.
With rates still low, it is a good time to talk to your loan officer and see what you can get qualified for. We expect mortgage rates will start to go up this year, so take advantage of these programs to purchase a home now!