For first-time homebuyers or those with not a lot of down payment, you might be looking for options for a mortgage. Are there options that provide either zero or low down payment alternatives? If you can’t come up with a 10% or 20% down payment, as most first-time homebuyers can’t, starting with a low down payment option is really your best bet to getting into the real estate industry. Once you’ve built up some equity from your first home you can roll that into a conventional loan later on down the line when you upgrade the property. For now, low down payment or zero down payment options bite be your best bet. Here’s what’s currently available.
This is a no down payment option for military personnel and those surviving spouses of the US military. If you have never served or your spouse has never served this is not an option. The US Department of Veteran Affairs offers VA loans, which are similar to FHA loans in that the agency guarantees repayment to lenders making the loans. VA loan qualifications are pretty straightforward available to active duty and honorably discharged service personnel. This is also available to those who have spent at least six years in the reserves or National Guard. No mortgage insurance is required, bankruptcy and other credit issues do not immediately disqualify you, and VA loans are available in sizes up to $726,525 in high-cost areas, especially in places like California.
This is also a no money down, 100% financing option for nonmilitary borrowers. The US Department of Aquaculture offers this type of loan for rural housing. It’s generally available to those in rural neighborhoods or even some suburban neighborhoods reaching low to moderate income homebuyers. Many homebuyers qualify for this type of loan and may include eligible home repairs or improvements and mortgage insurance is added onto the monthly payment. However, there is a maximum home purchase price for each area so check with your lender on specifics when it comes to the maximum loan amount.
FHA actually is the insurer of loans and require 3.5% down payment, a great option for first-time homebuyers. Your down payment can consist entirely from gifted funds but you do need a credit score of at least 500 and mortgage insurance premiums are paid upfront at closing and then monthly thereafter. The FHA will insure loans up to $726,525 in high-cost areas including Orange County so this might be a great option for first-time homebuyers.
This is a 3% down payment and is one of today’s lowest down payment options. These loans are backed by Fannie Mae and they have reduced mortgage insurance costs and it includes the income of everyone living in the household to be qualified. This is a great option for multigenerational families or those that make a lot of income throughout the household. Do you qualify? Find Out
Conventional loan 97.
This conventional loan 97 is a 3% down payment program and is available from both Fannie Mae and Freddie Mac. It’s a less expensive option compared to an FHA loan and the entire 3% down payment can come from gifted funds as long as the gift or is related by blood or marriage or legal guardianship. The loan size may not exceed $484,350 even in high-cost areas and the subject property must be a single unit dwelling. The mortgage is a fixed rate mortgage meaning there are no ARMS available.
The piggyback loan is reserved for buyers with an above average credit score and it is to loans offering flexibility and lower overall payments. The structure is with an 80/10/10 loan where the buyer brings 10% down payment and leaves 90% of the home for one mortgage and 10% in another mortgage. This is a unique option but might be a great benefit for lower mortgage terms and interest rates.
All of these make great low down or no down payment options but if I know what’s best for you it’s gonna depend on your credit history, score, and current financial situation. Give me a call at any time and let me ask some questions to find out what might be the best option for your home buying needs.
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