Essential Tips on Buying a House with a Low Down Payment in St. George Utah

Buying a house in St. George Utah involves a huge financial commitment. Thus, many people are left to borrow a mortgage in order to finance their homeownership dream. To qualify for a conventional home loan, you have to raise the 20% down payment, raise closing costs, and have a high credit score. For first-time buyers, paying the down payment and closing costs can be overwhelming. Thus, regardless of having a good credit score, many people are still locked out from homeownership.

Are you struggling to raise enough down payments to qualify for a home mortgage? Do you know that you can easily buy a house in St George with a low down payment or even no down payment? In this post, we share important tips to help homebuyers into homeownership even with low or no down payment.

  1. Explore Available Mortgage Options

There are several mortgage options available today. Each has its own set of pros and cons. For first time buyers looking to buying a house in St. George with a low down payment, talk to a mortgage broker to help you understand available options. Thus, you may want to consider the following options:

  • The Conventional Mortgages with Low down payment

First-time homebuyers with the required credit score can get a conventional mortgage with a low down payment. This is often as low as 3% depending on personal situation and lenders terms. In addition, the property you are purchasing will inform the mortgage lenders whether to consider the borrower for a conventional home loan with a low credit score.

However, bear in mind that paying less than 20% on the conventional home loan may require payment of the private mortgage insurance. Private mortgage insurance is what protects the mortgage lender in case you default on a mortgage. Note that private mortgage insurance is normally paid as part of the monthly mortgage repayments.

The other requirements to qualify for a conventional home loan with low down payment include a high credit score, a debt-to-income ratio of not more than 50%, and a loan amount that must fall within the set limits.

  • The FHA Home Loan

The Federal Housing Administration issues mortgages to borrowers who can raise a 3.5% down payment. Thus, the FHA home loan is considered a low down payment mortgage. To qualify for the FHA backed loan, you need a credit score of 580 or above. If your credit score falls between 500 and 579, you can still borrow this low down payment mortgage. However, you have to raise up to 10% down payment.

  • The VA Home Loan

Guaranteed by the Department of Veteran Affairs, The VA home loan requires no down payment. The VA home loan assists applicants to build, buy, or improve a home, or even to refinance the current home loan. The VA home loan is available to active servicemen or women and their surviving spouses. However, the applicants should meet the credit score requirements.

  • USDA Home Loan

This is a zero down payment home loan for rural and suburban buyers. Ideally, the mortgage option is suitable for the borrowers who are not wealthy and cannot qualify for the traditional mortgage. To qualify for the USDA home loan, you ought to have a dependable income and provide proof that you will keep to date with the mortgage repayments.

2. Consider the State or Local Homebuying Assistance Programs

In addition to the federally backed home buying programs, the state of Utah offers some assistance programs suitable for homebuyers who cannot raise a 20% down payment. The State-backed home buying programs are suitable for buyers with limited income but have a decent credit score.

Borrowers can apply through the statewide network of the participating lenders. Contact your mortgage lender to find out the available programs. However, be aware that the state-backed programs put restrictions on income, property purchase price, and the home location.

3. Compare the Mortgage Lenders Requirements

Shopping for mortgage lenders is always recommended. You will find that mortgage lenders will have varying requirements to be met by the mortgage borrowers. In that regard, check their requirements in terms of mortgage down payment. The idea is to choose a mortgage lender who is willing to lend at favorable terms that include a low down payment. However, bear in mind that the mortgage lenders might introduce a high mortgage interest rate in order to accommodate the low down payment requirements.

4. Stick To Your Budget

The down payment amount will also depend on the value of the property you are purchasing. The higher the property value, the higher the down payment that you will have to make. Therefore, you may consider revising the amount you intend to spend on buying a house in St. George, just to be sure you pay a lower down payment.

Key Takeaway

Now, you know the options to pursue in order to afford a house in St. George Utah with a low down payment. Talk to your mortgage lender for different options.

USDA Home Loan in Utah

How to Buy a House with Low Down in St. George

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.

Key Takeaway

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.