Want to buy a home, but worried about the upfront costs? You’re not alone. According to the National Association of Realtors, the largest obstacle first-time homebuyers face is saving for a down payment.
That being said, you may not need to save as much for a new home as you think. The reality is that there are plenty of loan options available with relatively low down payment requirements – and some options that require no down payment at all.
Conventional Loan Options
Many consumers mistakenly believe that in order to buy a home, they’ll need to make a down payment of 20% of the home’s purchase price. But in the vast majority of cases, that’s simply not true.
In fact, the two largest sources of funding for conventional loans, Fannie Mae and Freddie Mac, require only a 5% down payment for their conventional loan programs. Both Fannie and Freddie also have unique options for first-time homebuyers that require only 3% down—Fannie Mae’s HomeReady® and Freddie Mac’s Home Possible® and HomeOne®. With these programs, it’s also possible to use gifts and grants from employers, public agencies, and family members toward your down payment.
Fannie and Freddie’s programs do require borrowers to have solid credit and pay for private mortgage insurance, as well as meet other criteria. However, there are other, less restrictive options available, including government-insured loan programs.
Government Loans Options
For example, the Federal Housing Administration’s loan program enables homebuyers to buy a home with as little as 3.5% down. It gets even better with loans guaranteed by the USDA and the VA. Both government agencies offer a zero down loan program for individuals or properties that meet certain criteria.
For instance, USDA loans are available for rural properties, as defined by the agency. The USDA publishes a map that shows which communities qualify for USDA financing, which you can find here. In addition, your household income must meet certain guidelines, depending on the USDA loan program.
VA loans are available only to military veterans and their families that have earned VA credits. But if you are a veteran or currently serving in the military, it’s a great way to get into a home with very little upfront costs.
Our Low-Down Payment Option
While all of the above options are quite popular for first time homebuyers, some lenders offer their own low-down payment mortgage programs. In fact, Right By You Mortgage offers a First Time Homebuyer Loan program that helps eligible buyers purchase a home with as little as 3% down.
Our program provides several adjustable-rate mortgage (ARM) options, including 5/5, 7/1, and 10/1 terms. (For more information about ARM products, click here.) These options allow homebuyers to choose a loan that best suits their personal situation and future plans.
What makes our First Time Homebuyer Loan unique is that borrowers don’t have to pay for mortgage insurance, which is typically required with other loans when making a down payment of less than 20% of the purchase price. This can lead to significant monthly savings and reduce the overall costs of a home purchase.
Also, there are special financial incentives available to community partners, including teachers, firefighters, police officers, nurses and first responders.
Would you like more information about buying a home with little or no down payment? Our loan experts at Right By You Mortgage are here to help. Find a local loan officer near you or email us at inquiries@rightbyyoumortgage.com to get started.
