Are you considering buying a house in St. George Utah but you do not have enough savings to clear the 20% down payment? Do not be stressed because there are options you can pursue and buy a home with a low down payment or better still, no down payment.
Today, with the high cost of living and left with fewer income streams, raising the 20% down payment can be hectic. In this post, we evaluate the no down payment options and the zero down payment options available to first-time homebuyers.
No Down Payment Mortgage Options for First-Time Buyers
Mortgage options that require zero down payment enable first time home buyers to achieve their dream of owning a home. Thus, you can use your savings to clear the closing cost or other expenses involved in the home buying process. Here are a couple of no down payment mortgage options available in the market today.
- The VA Home Loans
Insured by the Department of Veteran Affairs, the VA home loans provide lenient requirements to borrowers. However, the VA home loan is available to the eligible active duty service members, the veterans, and their qualifying spouses. Ideally, the VA home loan is available through private mortgage lenders. However, the US Department of Veteran Affairs guarantees the VA home loan.
The VA Home loan can be used to fund the purchase of a primary residence. The borrowers can be allowed to purchase a home within a multiunit structure of up to four units. To qualify, the applicant must be willing to live in the home, which may be occupied by a spouse if the active member is currently deployed.
The VA home loan also allows the homebuyers to save on mortgage insurance. (The mortgage insurance is often a requirement for conventional mortgages). However, the applicant has to pay a funding fee, which is usually an onetime fee. Apart from being a no down payment mortgage, the VA home loan has no limits on the amount you can borrow.
- The USDA Home Loan
Guaranteed by the US Department of Agriculture, the USA home loan is another no down payment home mortgage. The USDA home mortgage was established to enable new homebuyers willing to purchase a property within the listed rural and suburban areas.
Just like the VA home loan, the USDA home loan is available through different private lenders. However, eligibility for the USDA home loan is based on the location of the house you intend to purchase, and not on the occupation. Moreover, to qualify for the USDA home loan, you must meet certain income requirements, and the household income should not exceed 115% of the median household income within a particular area.
The Mortgage Options with Low Down Payment
Having looked at the different mortgage options requiring zero down payment, let us now turn to the mortgage options that require a low down payment.
- The FHA Home Loan
Guaranteed by the Federal Housing Administration, the FHA home loan requires only a 3.5% down payment. The low down payment requirement makes the FHA home loan appealing to the first time homebuyers with very little savings. Moreover, compared to the conventional home loan, the FHA home loans have a lower credit score requirement. The FHA home loan is available to qualifying buyers through the private mortgage lenders. However, the FHA home loan comes with an annual mortgage insurance premium. The amount paid as the annual insurance premium is also dependent on the insurance rates as set by the federal government and depends on the term of the loan and the amount borrowed. However, mortgage borrowers have the option of paying up to 20% down payment for the annual insurance premium to be waved away.
- Conventional Home Mortgage by Fannie Mae and Freddie Mac
Unlike all other options we have looked under mortgage loans with low down payment and mortgage options with zero down payment, the conventional home mortgage is not government-insured. Instead, the loan type conforms to the guidelines as defined by Fannie Mae and Freddie Mac. For instance, with a fixed mortgage, first-time borrowers can get a loan with as little down payment as 3%. The borrower is also expected to pay annual mortgage insurance on this type of mortgage.
When it comes to borrowing home mortgage, it is advisable that you evaluate all available options before choosing one. One of the different constraints that many first time home buyers are facing is the ability to raise down payment. However, the low down payment and the zero own payment home mortgages provide an alternative to the mortgage borrowers. To determine the best home mortgage option, talk to a reputable mortgage broker. An experienced mortgage broker shall help you to evaluate the different options.