Low Down / No Down Payment Options
MORTGAGE RATES DROP TO 17-MONTH LOW
2015 is projecting to be another strong year for U.S. housing. Home sales are rising, home supply is dropping, and prices are increasing in many cities and neighborhoods.
Furthermore, mortgage interest rates are down.
30-year mortgage rates are below 4% nationwide and have fallen to their lowest levels since early-June 2013. Many lenders now quote rates and APR in the 3s; with rates for FHA and VA loans beating rates for conventional loans.
Lower mortgage rates yield lower monthly mortgage payments for today's home buyers. However, for many buyers, it's not the monthly payment which makes homeownership difficult -- it's the prospect of putting 20% down.
The good news is that, in today's mortgage market, there are a myriad of mortgage programs requiring little or no money down.
Click to see today's rates.
HOME BUYERS DON'T NEED TO PUT 20% DOWN
Buyers in today's U.S. housing market don't need 20 percent down. Many believe they do. This "20 Percent Down" misbelief may have true at some point in history, but certainly not since the advent of the FHA loan, which occurred in 1934.
The likely reason why buyers believe a twenty percent downpayment is required is because, with a conventional mortgage, putting twenty percent down removes the need for private mortgage insurance.
Private mortgage insurance is an insurance policy homeowners are required to pay in order to protect a lender in the event of default. Mortgage insurance costs vary by downpayment, state, and the borrower's credit score.
Home buyers -- especially first-time home buyers -- will sometimes delay a purchase because they don't feel as if they have enough money saved up for downpayment. And, while this should certainly be a consideration in homeownership, it should never be the only consideration.
Home affordability is not about how much money you can put down on a home. Home affordability is about whether you can afford the monthly payments that accompany owning a home.
A larger downpayment will result in a smaller loan size and, therefore, a smaller monthly mortgage payment. However, if you've depleted your life savings to make the purchase, perhaps the big downpayment was poor planning.
Financial experts call this being "house-poor". When you're house-poor, you have little money left to handle the everyday emergencies of life (and of homeowners).
Making a downpayment of less than 20% can be financially conservative, in this way.
Click to see today's rates.
FHA MORTGAGE : 3.5% DOWNPAYMENT
The FHA mortgage is somewhat of a misnomer because the FHA doesn't actually make loans. Rather, the FHA is an insurer of loans.
The FHA publishes a series of standards for the loans it will insure. When a bank underwrites and funds a loan which meets these specific guidelines, the FHA agrees to insure that loan against loss.
FHA mortgage guidelines are famous for their liberal approach to credit scores and downpayments. The FHA will typically insure a home loan for borrowers with low credit scores so long as there's a reasonable explanation for the low FICO.
The FHA allows a downpayment of just 3.5 percent in all U.S. markets, with the exception of a few FHA approved condos.
Other traits of an FHA loan include :
Your downpayment may consist entirely from "gift funds"
Your credit score requirement is 500
Mortgage insurance premiums are paid upfront at closing, and monthly thereafter
Furthermore, the FHA supports homeowners who have experienced recent short sales, foreclosures or bankruptcies through the agency's Back to Work program; and will reduce its FHA mortgage insurance premiums for first-time buyers via the Homeowners Armed With Knowledge (HAWK) program.
The FHA insures loan sizes up to $625,500 in designated "high-cost" areas nationwide. High-cost areas include Orange County, California; the Washington D.C. metro area; and, New York City's 5 boroughs.
Click to see today's rates.
CONVENTIONAL 97 : 3% DOWNPAYMENT
Editor's Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product's guidelines.
The Conventional 97 program is available from Fannie Mae and Freddie Mac. It's a 3 percent downpayment program and, for many home buyers, it's a less-expensive option as compared to an FHA loan.
Furthermore, the Conventional 97 mortgage allows for its entire three percent downpayment to come from gifted funds, so long as the gifter is related by blood or marriage; or via legal guardianship or domestic partnership; or is a fiance/fiancee.
The Conventional 97 basic qualification standards include :
Loan size may not exceed $417,000, even if the home is in a high-cost market.
The subject property must be a single-unit dwelling. No multi-unit homes are allowed.
The mortgage must be a fixed rate mortgage. No ARMs via the Conventional 97.
The Conventional 97 program does not enforce a specific minimum credit score beyond those for a typical conventional home loan. The program can be used to refinance a home loan, too.
Editor's Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product's guidelines.
VA LOAN : NO MONEY DOWN / 100% FINANCING
The VA loan is a no-money-down program available to members of the U.S. military and surviving spouses.
Guaranteed by the U.S. Department of Veteran Affairs, VA loans are similar to FHA loans in that the agency guarantees repayment to lenders making loans which means VA mortgage guidelines.
VA loan qualification are straight-forward.
In general, active duty and honorably discharged service personnel are eligible for the VA program. In addition, home buyers who have spent at least 6 years in the Reserves or National Guard are eligible, as are spouses of service members killed in the line of duty.
Some key traits of the VA loan include :
You may use intermittent occupancy
Bankruptcy and other derogatory credit do not immediately disqualify you
No mortgage insurance is required
VA loans also allow for loan sizes of up to $1,094,625 in high-cost areas. This can be helpful in areas such as San Francisco, California; and Honolulu, Hawaii which are home to U.S. military bases.
Click to see today's rates.
USDA MORTGAGE : NO MONEY DOWN / 100% FINANCING
No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage. The program is formally known as a Section 502 mortgage, but, more commonly, it's called a Rural Housing Loan.
The good news about the USDA Rural Housing Loan is that it's not just a "rural loan" -- it's available to buyers in suburban neighborhoods, too. The USDA's goal is to reach "low-to-moderate income homebuyers", wherever they may be.
Many borrowers using the USDA Single Family Housing Guaranteed Loan Program make a good living and reside in neighborhoods which don't meet the traditional definition of rural.
For example, college towns including Christiansburg, Virginia; State College, Pennsylvania; and even suburbs of Columbus, Ohio meet USDA eligibility standards. So do the less-populated suburbs of some major U.S. cities.
Some key traits of the USDA loan include :
You may include eligible home repairs and improvements in your loan size
There is maximum home purchase price
Guarantee fee added to loan balance at closing; mortgage insurance collected monthly
Another key benefit is that USDA mortgage rates are often lower than rates for comparable, low- or no-downpayment mortgages. Financing a home via the USDA can be the lowest cost means of homeownership.
HOME BUYERS GET LOW MORTGAGE RATES
Not everyone will be eligible for today's low-downpayment loans, which is okay. The next-lowest downpayment loan comes from Fannie Mae and Freddie Mac and it requires just five percent down.
See how today's low rates and low-downpayment loans fit your budget. And, consider getting a no-obligation pre-approval for your purchase. Personalized rate quotes are available online at no cost and with no social security number required to get started.
Home Page |
2015 is projecting to be another strong year for U.S. housing. Home sales are rising, home supply is dropping, and prices are increasing in many cities and neighborhoods.
Furthermore, mortgage interest rates are down.
30-year mortgage rates are below 4% nationwide and have fallen to their lowest levels since early-June 2013. Many lenders now quote rates and APR in the 3s; with rates for FHA and VA loans beating rates for conventional loans.
Lower mortgage rates yield lower monthly mortgage payments for today's home buyers. However, for many buyers, it's not the monthly payment which makes homeownership difficult -- it's the prospect of putting 20% down.
The good news is that, in today's mortgage market, there are a myriad of mortgage programs requiring little or no money down.
Click to see today's rates.
HOME BUYERS DON'T NEED TO PUT 20% DOWN
Buyers in today's U.S. housing market don't need 20 percent down. Many believe they do. This "20 Percent Down" misbelief may have true at some point in history, but certainly not since the advent of the FHA loan, which occurred in 1934.
The likely reason why buyers believe a twenty percent downpayment is required is because, with a conventional mortgage, putting twenty percent down removes the need for private mortgage insurance.
Private mortgage insurance is an insurance policy homeowners are required to pay in order to protect a lender in the event of default. Mortgage insurance costs vary by downpayment, state, and the borrower's credit score.
Home buyers -- especially first-time home buyers -- will sometimes delay a purchase because they don't feel as if they have enough money saved up for downpayment. And, while this should certainly be a consideration in homeownership, it should never be the only consideration.
Home affordability is not about how much money you can put down on a home. Home affordability is about whether you can afford the monthly payments that accompany owning a home.
A larger downpayment will result in a smaller loan size and, therefore, a smaller monthly mortgage payment. However, if you've depleted your life savings to make the purchase, perhaps the big downpayment was poor planning.
Financial experts call this being "house-poor". When you're house-poor, you have little money left to handle the everyday emergencies of life (and of homeowners).
Making a downpayment of less than 20% can be financially conservative, in this way.
Click to see today's rates.
FHA MORTGAGE : 3.5% DOWNPAYMENT
The FHA mortgage is somewhat of a misnomer because the FHA doesn't actually make loans. Rather, the FHA is an insurer of loans.
The FHA publishes a series of standards for the loans it will insure. When a bank underwrites and funds a loan which meets these specific guidelines, the FHA agrees to insure that loan against loss.
FHA mortgage guidelines are famous for their liberal approach to credit scores and downpayments. The FHA will typically insure a home loan for borrowers with low credit scores so long as there's a reasonable explanation for the low FICO.
The FHA allows a downpayment of just 3.5 percent in all U.S. markets, with the exception of a few FHA approved condos.
Other traits of an FHA loan include :
Your downpayment may consist entirely from "gift funds"
Your credit score requirement is 500
Mortgage insurance premiums are paid upfront at closing, and monthly thereafter
Furthermore, the FHA supports homeowners who have experienced recent short sales, foreclosures or bankruptcies through the agency's Back to Work program; and will reduce its FHA mortgage insurance premiums for first-time buyers via the Homeowners Armed With Knowledge (HAWK) program.
The FHA insures loan sizes up to $625,500 in designated "high-cost" areas nationwide. High-cost areas include Orange County, California; the Washington D.C. metro area; and, New York City's 5 boroughs.
Click to see today's rates.
CONVENTIONAL 97 : 3% DOWNPAYMENT
Editor's Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product's guidelines.
The Conventional 97 program is available from Fannie Mae and Freddie Mac. It's a 3 percent downpayment program and, for many home buyers, it's a less-expensive option as compared to an FHA loan.
Furthermore, the Conventional 97 mortgage allows for its entire three percent downpayment to come from gifted funds, so long as the gifter is related by blood or marriage; or via legal guardianship or domestic partnership; or is a fiance/fiancee.
The Conventional 97 basic qualification standards include :
Loan size may not exceed $417,000, even if the home is in a high-cost market.
The subject property must be a single-unit dwelling. No multi-unit homes are allowed.
The mortgage must be a fixed rate mortgage. No ARMs via the Conventional 97.
The Conventional 97 program does not enforce a specific minimum credit score beyond those for a typical conventional home loan. The program can be used to refinance a home loan, too.
Editor's Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product's guidelines.
VA LOAN : NO MONEY DOWN / 100% FINANCING
The VA loan is a no-money-down program available to members of the U.S. military and surviving spouses.
Guaranteed by the U.S. Department of Veteran Affairs, VA loans are similar to FHA loans in that the agency guarantees repayment to lenders making loans which means VA mortgage guidelines.
VA loan qualification are straight-forward.
In general, active duty and honorably discharged service personnel are eligible for the VA program. In addition, home buyers who have spent at least 6 years in the Reserves or National Guard are eligible, as are spouses of service members killed in the line of duty.
Some key traits of the VA loan include :
You may use intermittent occupancy
Bankruptcy and other derogatory credit do not immediately disqualify you
No mortgage insurance is required
VA loans also allow for loan sizes of up to $1,094,625 in high-cost areas. This can be helpful in areas such as San Francisco, California; and Honolulu, Hawaii which are home to U.S. military bases.
Click to see today's rates.
USDA MORTGAGE : NO MONEY DOWN / 100% FINANCING
No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage. The program is formally known as a Section 502 mortgage, but, more commonly, it's called a Rural Housing Loan.
The good news about the USDA Rural Housing Loan is that it's not just a "rural loan" -- it's available to buyers in suburban neighborhoods, too. The USDA's goal is to reach "low-to-moderate income homebuyers", wherever they may be.
Many borrowers using the USDA Single Family Housing Guaranteed Loan Program make a good living and reside in neighborhoods which don't meet the traditional definition of rural.
For example, college towns including Christiansburg, Virginia; State College, Pennsylvania; and even suburbs of Columbus, Ohio meet USDA eligibility standards. So do the less-populated suburbs of some major U.S. cities.
Some key traits of the USDA loan include :
You may include eligible home repairs and improvements in your loan size
There is maximum home purchase price
Guarantee fee added to loan balance at closing; mortgage insurance collected monthly
Another key benefit is that USDA mortgage rates are often lower than rates for comparable, low- or no-downpayment mortgages. Financing a home via the USDA can be the lowest cost means of homeownership.
HOME BUYERS GET LOW MORTGAGE RATES
Not everyone will be eligible for today's low-downpayment loans, which is okay. The next-lowest downpayment loan comes from Fannie Mae and Freddie Mac and it requires just five percent down.
See how today's low rates and low-downpayment loans fit your budget. And, consider getting a no-obligation pre-approval for your purchase. Personalized rate quotes are available online at no cost and with no social security number required to get started.
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