Coming up with a sizable down payment is perhaps one of the most frustrating barriers to homeownership. A clean credit history and decent income should be enough, but in some cases, it isn’t. Many conventional lenders require as much as 20% down, which can be difficult for many families to come up with. Fortunately, there are other options that require little to no down payment.
Federal Housing Administration
Also known as FHA mortgages, loans secured by the Federal Housing Administration allow first-time home buyers to purchase a residence for as little as 3.5% down. What’s more, these types of loans have less stringent qualifying criteria, which means they’re easier to get. The FHA does require an upfront mortgage insurance payment at the rate of 1.75% of the loan amount, as reported by Bankrate. Borrowers are also responsible for an annual premium of 0.8%.
Department of Veterans Affairs
The Department of Veterans Affairs helps service members, veterans and spouses of veterans attain the dream of homeownership via a VA loan. This is a no-money-down loan that has more favorable interest rates than other types of loans and doesn’t require mortgage insurance. The VA may also provide assistance for homeowners who are unable to make their mortgage payments.
USDA Rural Loan
USDA rural loans enable qualified buyers to purchase a home with no money down, provided the home is located in specified areas covered by the program. But don’t worry, approximately 97% of areas qualify. It’s available to low- and average-income buyers, with lower rates than most other loans. It may also cover costs for home repairs and improvements. Private mortgage insurance is required.
HomeReady Mortgage
A relatively new option, the HomeReady Mortgage allows potential buyers to purchase a home for as little as 3% down. What makes this loan unique is that buyers can count all the income of the household, even that of teenage dependents, to meet eligibility requirements. Buyers are required to complete an online homeowner counseling course. Private mortgage insurance is required, but cancelable. Also of note, this mortgage is only available in low-income areas.
Conventional 97 Program
Made possible by Fannie Mae, the conventional 97 program provides mortgages to buyers of moderate and modest means. It has a 3% down payment requirement. However, buyers must be able to qualify for a conventional loan, which means there are stricter income and credit requirements.
Don’t have a 20% down payment? Don’t worry. There are plenty of programs out there that will get you in a new home for a small down payment or no down payment at all. How do you find the best deals? Do plenty of research and don’t forget to consult with a mortgage expert.
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