Do you think it is impossible buying a home without a 20% down payment? Maybe not, if you understand the lending industry well. Certain mortgages and home buying programs allow home buying with a low down payment or no down payment at all. Therefore, with as low as 3% down or less, you can become a happy homeowner.
A no down payment mortgage allows first time home buyers and experienced home buyers to purchase a property with no money required at closing except the standard closing costs. In this post, we feature important options allowing you to buy a home with a low down payment or zero percent down.
Let us start with the low down payment options:
1. The FHA Loans (Low Down Payment at 3.5% Down Payment)
The Federal Housing Administration (FHA), introduced FHA insured loans, available to qualified individuals through mortgage lenders. The FHA low down payment mortgage intends to help the low and moderate-income earners, who would otherwise be locked out of the housing market.
Thus, with a 3.5% down payment and at least a 580 credit score, you can borrow the low down payment mortgage by FHA. However, the drawback is that you need to pay an upfront mortgage insurance premium of 1.75% of the loan amount. In addition, a monthly mortgage insurance premium is included in the mortgage repayments. This could range from 0.45% to 1.05% of the loan amount per year.
Why choose the FHA home loan? Here are some of the reasons you may need to consider the FHA backed home loan with a low down payment.
- Comes with a low down payment of just 3.5% down
- Features flexible qualification guidelines
- A debt-to-income ratio as high as 55%
- Requires upfront and monthly mortgage insurance premium
- Enjoy a no cost and no qualifying streamline refinance
Apply for The FHA Home loan today.
2. The VA Loan –No Down Payment Mortgage
The U.S. Department of Veteran Affairs offers zero down payment home buying loans to the members of the U.S. military and the surviving spouses.
The VA guarantees these loans and avails them through various lenders. Thus, if you are an active or a retired military officer, or a surviving spouse, with the VA zero down payment mortgage, you can buy a home.
The VA home loans do not have a minimum credit score, but the VA mortgage lenders may require that you raise at least a 580 credit score. As illustrated, the zero down payment home loan comes with flexible credit terms, with phenomenal interest rates compared to other home loans. Unlike the FHA home loan, borrowers do not have to pay a monthly mortgage insurance premium. The VA loan also comes with two refinancing options.
Here is a summary of some of what you need to know regarding the VA home loan:
- It is a zero down payment home mortgage
- Borrowers pay the VA upfront funding fees but there is no monthly mortgage insurance
- It is available to the eligible veterans only
- Enjoy “no-cost” and “no qualifying” streamline refinance
- Available for 30-years fixed rate
If you intend to apply for this zero down payment mortgage, note that the VA home loan is subjected to the VA eligibility rules
3. The USDA Home Loan- No Down payment home buying mortgage
Available through the U.S Department of Agriculture, the USDA home loan offers up to 100% financing to eligible homebuyers. The USDA home loan program is formally known as the Section 502 mortgage although most lenders call it the Rural Housing Loan.
The USDA rural housing loan is available to the homebuyers eyeing the suburban neighborhoods and aims at reaching the low-to-moderate income homebuyers. With the USDA rural housing program, the borrower may include eligible home repairs and home improvements in the loan amount. In addition, there is a maximum home purchase price while the guarantee fee is added to the loan balance at closing. The USDA home loan carries a lower interest rate compared to a conventional home loan.
Here are some of the advantages of the USDA no down payment home mortgage
- Comes with a low monthly mortgage insurance
- Available for 30 years at a fixed rate
- Allows buying of properties within eligible rural areas
- Comes with flexible qualification guidelines
- Enjoy financing of up to 103.5% of the appraisal value
The USDA home loan requires an up-front guarantee premium while the monthly mortgage insurance premium is low. Note that the maximum income limits will vary by country.
With millions of Americans facing financial burdens that include student loans and high unemployment rates after the Coronavirus pandemic, raising a 20% down payment can be daunting. The good news is that buying a house in St. George is still possible. This is through taking advantage of the no down payment or the low down payment home mortgage.