Many of my clients want to buy a home with no money down – or very little! For first time homebuyers, that can be an option. For some USDA or VA loans are options to allow you to buy with zero down! For others, down payment assistance is possible.
Is a $0 down mortgage an option for you? If you are looking outside the metro area, a USDA loan may be an option for you. Areas around here that qualify are Elko New Market, New Prague, Jordan, Waconia, Buffalo, Zimmerman, Isanti and Chisago City are possible options. With more people working from home, there are many that are looking to move further out of the cities and so USDA may be an option. You do need to meet income limits but it’s a possibility.
VA loans are another option. If you have VA eligibility, a VA loan is a great way to buy a home. You can buy with zero down. With VA loans, the funding fee is added to your mortgage and there isn’t any additional monthly fee.
There are many low down payment options. One of the mortgage types used a lot is FHA financing. FHA requires 3.5% down. You can get a gift from a family member if that is an option. Guidelines for credit tend to be more flexible than conventional loans. Credit scores can be lower. There is mortgage insurance required and the amount varies based on your down payment. For those with foreclosures, bankruptcies and short sales, a FHA loan may be an option for you to buy sooner than you expected!
Conventional loans offer a couple low down payment options. Fannie Mae has a Home Ready program that allows 3% down. Freddie Mac has a program called Home Possible. Both are very similar, both allow gift money and the seller can contribute to closing costs. Both have mortgage insurance but the higher your credit score, the lower the mortgage insurance. The MI will also go away once you have enough equity in the home. These programs have income limits. If you are a first time homebuyer, there are also 3% down programs that do not have income limits. The interest rate and mortgage insurance may be higher but it does allow you to get into a home with less down.
There are also down payment assistance programs available. They work with FHA, conventional and VA loans. There are credit score requirements and also income limits, but this can really help those that are struggling to get a down payment to purchase a home. Some of the programs require you to pay back the assistance over the first 10 years, other allow the assistance to be deferred until you sell your home or pay off the mortgage.
When you are looking at purchasing a home, sometimes it makes more sense to put less down even if you have the ability to put more down. You want to make sure you have money left over in case of emergencies. More than once I have worked with clients that we changed the down payment based on the home. If they knew they might have to replace a furnace or maybe needed to do some upgrades, it made more sense to put less down and leave a cushion to help with those changes. Once you find your new home, talk with your realtor and loan officer to decide what makes the most sense! It may change based on the home and your plans for the home!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website