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How Can I Buy A Home Without A Downpayment
How Can I Buy a Home Without a Downpayment?
For a lot of people, saving for a down payment is the step that kills their home buying dreams. Something people don't know... there are a variety of options that allow you to buy a home at little to no money down and these options are readily available to the majority of people.
First let's define downpayment. A down payment is an amount of money the home buyer pays towards the home. The remaining balance due on the home is broken up into your monthly mortgage payments spread out over as many as 30 years. One of the biggest myths in real estate is that you have to put 20% down payment toward the home to qualify. This is simply untrue. Depending on the type of loan you have, you may not have to pay anything at all! Here are the different types of low to no down payment options you can apply for.
FHA Loan: The Federal Housing Administration has a more lenient loan program called the FHA loan. This loan requires a 3.5% down payment which can come to you as a gift from a family member or from an approved non-profit, according to The Mortgage Reports. U.S. citizens and permanent residents are eligible and you don’t even have to have that great of credit to get approved. On top of this, you may end up with a lower mortgage rate going with an FHA loan than some of the other options.
VA Loan: The Veteran’s Affairs office gives out the best deal for those who are or have served in the military. This loan option is a no money down option and should be one of the first options explored by those who have current or past military experience. Although the VA doesn’t have a minimum credit score, a credit score in the good or great range generally gets you a better interest rate. According to Realtor.com, some homes won't be approved for a VA home loan. However, many do qualify and the mortgage rates under this loan are some of the best around.
Credit Union Financing: Credit unions are a good option for a loan that requires little to no downpayment. Each credit union may have their own specialty loan and their own requirements to apply for it. Generally, it is a requirement that you are a member of the credit union you are applying for a home loan with. You will need a relatively good credit score and there is an income requirement that is often very flexible, but depends on each credit union individually. Make sure to check with your local credit union to find out their exact requirements for financing on no down payment loans.
USDA Loan: The United States Department of Agriculture offers loans known as USDA loans or Rural Development loans (RD). This means a 0% down payment for you! While you might see “rural” and think about skipping over this section, DON’T! According to Realtor.com, the USDA’s definition of “rural” is a town with a population of 10,000 or less. Actually about 97% of the country fits into this criteria! Homes outside of a cities limits are generally included as well. A requirement for this loan type might be based off of your income. Your credit doesn’t have to be all that great and this loan offers some of the lowest mortgage rates available. When considering a home purchase, ask your lender about this loan or check out the USDA’s website for your area’s eligibility requirements.
Conventional 97: Commonly referred to as a Conventional Loan. This loan is through Fannie Mae and can require as little as a 3% down payment. The down payment can be paid through a number of options and sources. You will want relatively good credit to keep the interest rate down when using this loan. PMI is private mortgage insurance and is required with most loan types. PMI is insurance that the bank makes you pay to insure the money that they loaned you. To get out of paying for PMI, you can put a 20% down payment towards the home. The government may let you use you PMI payment for a tax ride off but this is better understood when speaking with a tax professional. Most applicants for a Conventional Loan need a credit score of at least 620 to qualify.
Home Ready Mortgage: This loan is less common but is also through Fannie Mae. This is another 3% down payment loan option with less restrictions than most other loan types. It has an income limit that is defined by equal to or lesser than your area’s median income. The special thing about this loan is, you can use a roommate's income as part of the equation be qualified and approved.
Down Payment Assistance Programs (DPA): DPA programs are grants or loans used to help those come up with a down payment for their future home. The Mortgage Report tells us that 87% of homes are eligible for these programs. These loans and grants vary depending on your geographic area so make sure to check with a lending professional or the HUD website. You may even be able to use both a DPA program and a no to low down payment loan together. To see if you qualify, speak with a mortgage broker local to your area.
We hope you can see that your dream home is not out of reach! Call us today with all of your mortgage and home buying questions. It is our pleasure to help guide you through this process.
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Born and raised in "sunny" Washington state, AJ's favorite thing about living in Vancouver is that it is an hour and a half from EVERYTHING (beach, mountains, outlet malls, etc). He also loves that Va....
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