Taking the steps towards homeownership is a day that most people dream about. While the idea of having to save 20% for a down payment can seem daunting for couples on a budget. It is a common misconception that in order to buy a home you must put 20 percent down. It is still possible to achieve homeownership through some mortgage programs if you are unable to put less than 20% down. There are some programs that offer no down payments as well as ones with a small down payment that you may qualify for. We have provided a few mortgage programs for those couples who are unable to put 20% down but still want the ability to purchase their dream home. You may actually find that you don’t have to budget as much as you think to realize your dreams.
Below are four different types of mortgage programs for those who are unable to make a down payment of 20% but are still looking to achieve homeownership...
The Federal Housing Administration loans offer lower down payments and flexible underwriting standards so that second chance buyers can be approved without any issue. They are the best option for first-time buyers who are still trying to build their credit. With an FHA loan, you can make a downpayment as low as 3.5% on your first home. It is possible to be eligible for a low down payment even if your credit score is as low as 580. This type of loan allows you to buy a home now instead of later due to the benefit of a lower down payment. Similar to a conventional loan, you can’t use FHA loans for cash-out refinances.
The U.S. Department of Agriculture loan allows you to get low mortgage interest rates without a downpayment and is helpful to homeowners in rural areas. The loan was designed to help low-income families have more access to homeownership. This type of loan has no down payment options but it does require borrowers to meet credit and income requirements in order to qualify. There is also an upfront guarantee fee which a borrower can add to the cost of their mortgage. Mortgage rates for the USDA loan are often the lowest of all government-supported programs.
This program can be used by both first-time buyers and repeat buyers, it can also be used by those looking to refinance. This type of loan isn’t backed by a government agency. It is a good loan choice for those with good credit, they also offer higher loan limits than most government-supported loans. It is possible to use this type of loan on a second home or an investment property. Conventional loans can also be more flexible in down payment and term length options. This type of loan also offers more choices in loan structure. While a 30-year fixed rate is common with a conventional loan you can find other terms as well as adjustable-rate mortgages. Through this program, it is possible to have the down payment come entirely through gifted funds so you’re able to help relatives make the down payment.
Through the Department of Veteran Affairs veterans of the U.S. Armed Services are able to have access to programs unavailable to the average consumer. VA loans provide 100% financing and underwriting standards are sensitive to the specific needs of a military family. With conventional financing, military families can be challenged to prove income. The VA loan allows for standards to be loose and for approvals to be simple. VA mortgage rates are also typically lower than the conventional mortgage company. VA loans also require no mortgage insurance ever regardless of your downpayment, the VA won’t charge to insure your loan.