People get sick of renting a house or apartment. Why should you be paying for the mortgage of your landlord for year after year? It makes more sense to pay your own mortgage so that you can grow your equity and someday own your home free and clear. The Federal Reserve has kept interest rates low and banks seem to willing to take more risks since Donald Trump was elected.
The great news is that there are several low-down payment home loans in the Trump era.
Below are more details about each low down payment financing option:
There was a day, decades ago when home loans only could be obtained by those with high credit scores and high down payments. During the Great Depression, the FHA program was started to help people of modest means to buy a home.
The program has changed over the years a lot. But these days, you can get an FHA mortgage with poor credit, a low-down payment and modest income.
The FHA product is under-written by an approved FHA lender, not by the Federal Housing Administration itself.
If the borrower has a credit score of at least 580, you may qualify for a 3.5% down payment on a FHA loan. This amounts to a mere $7,500 for a $200,000 loan. This is one of the lowest down payment programs available today. Most 100% financing home loans went out with the housing crash. But there are two options left that we cover later in this article.
To qualify, you need to have at least a 500-credit score (this low score requires a 10% down payment). A credit score in the low 600’s will make it easier to find an FHA mortgage company to work with you.
A nice plus with an FHA mortgage – if you have a rich uncle J, you can get your entire down payment as a gift. So, you will not have to put down any money at all in this case. All you would need to do is pay for closing costs; FHA also allows part of the closing costs to come from the seller if they agree to do so.
FHA financing does require mortgage insurance, so this is an additional monthly cost on your loan payment.
A sub-product to the FHA finance program that is good to know about is the 203k home rehab loan. This loan allows you to borrow funds in addition to your FHA lien so that you can make renovations and repairs to your property.
To qualify, you only need to have a 3.5% down payment with your FHA mortgage. You may be qualified to receive up to $35,000 for a 203k streamlined loan, and an unlimited amount for a regular 203k loan.
This is one of the lowest cost ways to pay for a home rehab. The interest rate on this loan is usually the same low rate as found on FHA loans.
2. VA Loans
The VA finance product is a very good no down payment home loan option in the Trump era. This VA home loan is a 100% financing loan that is available to people who are in the US military or are retired veterans. Their surviving spouses also are usually eligible. Military borrowers love that the first time home buyer down-payment is still $0.
The VA mortgage is a very flexible home loan, and there is no maximum debt to income requirement as with other loans. There also is no mortgage insurance on this loan as with FHA financing.
The VA house loan is probably the best deal available on the US home market today, if you can qualify. Rates are also even lower than FHA loans. To qualify for this loan, you must meet one of the following terms:
- Active duty or honorably discharged
- Members who have been in the Reserves or National Guard for at least six years
- Surviving spouses of military members killed in the line of duty
You do not have to have good credit to get a VA program, and you can still qualify with a bankruptcy or foreclosure. It also is possible to have a DTI ratio as high as 70%.
3. USDA Loans
For people who are buying a home in a more rural area, the USDA loan can be a great choice. It is also a 100% house financing with very low rates and flexible credit criteria.
This loan program has been designed for people with a moderate income of up to $73,600 for most areas of the US. If you live in a higher cost rural area, the maximum income is $103,400.
You must buy a home that according to the USDA is in a rural area. Some homes near major cities may qualify. You can either check with the USDA website or check with your real estate agent to see if your home will qualify.
This program is backed by Fannie Mae, and is available from many mortgage lenders. This unique program will consider the income for everyone in the home, even people who are not on the loan. This will help you to boost your DTI ratio.
You can purchase a home with just a 3% down payment, but the home has to be on the HUD HomeStore website. You also can get a 3% credit for closing costs if you attend a home buyer education program.
It is important to remember that you do not need to have 20% to put down to buy your home. The above home financing programs allow you to put little to no money down. The most important part is to have the income on paper to support the mortgage and your other debt payments.