For many homebuyers, saving up for the downpayment is often the biggest roadblock to owning a home, especially with the skyrocketing home prices. The good news - you can buy a home with a down payment of as little as 3%.
Better still, you can buy your dream home with a 0% down payment if you qualify for certain government-backed loan programs. And even if you aren’t eligible for any of these programs, you can take advantage of home buyer programs that offer down payment assistance.
In this post, we’ll explore all the options that allow home buyers to purchase property with little to no money down. Let’s get to it!
1. No Down Payment Mortgage Options
The best and the most affordable option is to take a no-down payment mortgage. Few options are available that you could try out, including:
(i) VA Loans
VA loans are backed and guaranteed by the US Department of Veteran Affairs. If you need to buy a home and have no savings for the down payment, this option might be the best for you. Unfortunately, VA loans are available to eligible members of the military community and their spouses. On the positive side, eligible members don’t have to pay mortgage insurance, even with a 0% down payment.
(ii) USDA Loans
If you’re not a veteran or a member of the military community, fret not. You may still qualify for a USDA loan that doesn’t require a down payment. These loans are backed and offered through the US Department of Agriculture and made available for low- and moderate-income earners to purchase affordable homes in rural areas. Much like VA loans, no down payment is required with a USDA loan. However, the borrower is required to pay a guarantee fee which serves to protect the lender in the event of non-payment or foreclosure.
2. Low Down Payment Mortgage Options
If you aren’t eligible for any of the no downpayment loan options discussed above, consider applying for a low downpayment mortgage option.
Many low-down payment mortgages exist, including:
(i) FHA Loans
FHA loans are your best bet when it comes to low down payment mortgages. A loan backed by the Federal Housing Agency requires a low down payment of 3.5%. However, you’ll need to pay two monthly mortgage insurance premiums—one upfront at closing and the other annually throughout the life of the loan.
(ii) Fannie Mae Home Ready Loans
This type of loan is designed to provide affordable mortgages to low-income borrowers. With Fannie Mae, borrowers can put down as little as 3%. Note that with this loan program, the down payment doesn’t need to come from the borrower’s savings; it could result from a gift. However, you’ll need mortgage insurance. Fannie Mae also requires first-time buyers to take a homeownership course.
(iii) Freddie Mac Home Possible Loan
Like Fannie Mae, the Freddie Mac loan program requires a low down payment of at least 3%. Again, down payment funding is flexible with no personal savings requirements. This conventional loan also requires mortgage insurance, but buyers can cancel their policy when they reach 20% equity.
3. Down Payment Assistance Programs
Assuming you are not eligible for any of the above programs, you still have another alternative; down payment assistance programs. These programs come in the form of grants, loans, and other programs, specifically designed to help homebuyers with down payment assistance. Eligibility varies by state and is often determined by your income and credit scores.
Closing Remarks
Down payment costs are a huge hindrance to first-time home buyers who can’t raise the required amount. However, the existence of no to low down-payment options is a relief and a great way to own a home without putting much down.
So if saving for a large down payment is a challenge, don't fret. Contact Jersey Mortgage and let one of our experienced Loan Officers guide you throughthe process and discover what options may be available to you.
