Now is a good time to buy a home. Interest rates are still historically low and prices are on the way up, but they have not come close to peaking. Before you get too excited, let’s outline a to-do list to follow so you can make some prudent choices when buying a home in 2017.
Take some time to find out which home buyer programs best meet your financial needs.
Consumers need to know their options when it comes to how much a down-payment is needed to buy a house. When considering a home loan, the down-payment requirements must be met to qualify for financing but there are a handful of stellar programs boasting of low down-payment loans, so let’s examine the differences now.
The Conventional loan programs are FHA, Fannie Mae and Freddie Mac. Private money lenders offer alternatives that usually require a 10% deposit which is significantly more than FHA loan down payments that only require 3.5% down. Everyone raves about the no money down mortgage options available through the VA and USDA, but you must meet their eligibility.
Do your homework and get the specifics on first time home buyer down payment requirements.The new Trump administration is likely to make buying a home easier and there will be possibly more loan products available soon. This also could mean that home prices could be rising significantly in the next two years, so as we said, this is a great time to buy!
If you are interested in becoming a home owner soon, you probably are looking for ways to put down a low down payment and conserve your cash. The good news is that there are several low money down programs available, and more could open up in the near future.
20% Down Payment Is Not Needed
Right after the market crash of 2008, it was common to need 20% down to buy a home again. Fortunately, that did not last long. Also, there has long been a myth that you need to put down 20% because with a conventional loan, you need 20% equity to pay no private mortgage insurance. But it is in no way true that you need to put down 20%.
No Need to Run Out Your Savings
Even if you have the ability to put down 20%, you really should not if you don’t have to; you do not want to get into a situation where you are ‘house poor.’ It may be great to have your house, but it stinks if you have no money to go out to dinner or to put down new tile in the kitchen!
In fact, there are strong financial arguments for NOT putting 20% down on your home. If that is most of your savings, you are running a real financial risk of having something go wrong with your home, car or family and not having the money to cover it. Before making an offer on a home, it is essential to understand the guidelines and standards in regards to mortgage down payment requirements before you start signing documents.
Top 4 Home Loan Programs with Attractive Down-Payment Options
Let’s discuss why you should consider the following low money down and no money down programs to buy a home:
#1 No Money Down Mortgage Guaranteed by the VA
If you are a military veteran or active duty military, you are in a great situation. You have the ability to get a home loan and put no money down. VA loans are guaranteed by the US Department of Veteran Affairs. This means that your home loan is guaranteed by the VA. So, if you do not make your mortgage payments, the VA will pay off the lender.
This is the reason that the lender is able to offer you a home loan with 100% financing. And that is not the only benefit of a VA loan.
You also can enjoy very flexible qualification criteria, such as low credit score and relatively low income. You will need to show that you have enough income to pay the mortgage, but as a vet, you get plenty of flexibility.
Also, you can have a recent foreclosure or even a bankruptcy and still qualify. This will depend upon the lender, but it is not a definite obstacle.
#2 100% Financing USDA Loan
There are no money down loans for those who were not in the military, too. The USDA offers a 100% financing mortgage; this program is known as a Section 502 mortgage, and it is also called a rural housing loan.
The good news on this is that you can sometimes qualify for a ‘rural housing loan’ and not really be in a rural area. Some suburban areas may well qualify for a USDA, 100% financing loan.
This program also has very flexible lending criteria, and it is not necessary to have a high credit score.
#3 FHA Down Payment Loan
One of the most popular home loan programs by far is the 3.5% down, FHA loan. Similar to a VA loan, the FHA loan is guaranteed by the FHA, and if you do not pay your loan, it is paid back to the lender by FHA.
This allows lenders to offer low down payment loans, as low as 3.5%. While this is not quite as good as a 100% financing loan, a $200,000 loan may only need as little as $7500 down, plus closing costs (but these can be paid in part by the seller).
The 3.5% FHA loan down payment opens up the possibility of home ownership to millions of families. It is even more available to many people because it has very flexible lending criteria. You can have a credit score as low as 620 and still qualify for a 3.5% down payment.
You will need to pay mortgage insurance on this loan for its entire life, unless the laws change under the Trump administration. While many do not like mortgage insurance, a way to look at it is that you are able to buy a home with a very low down payment by paying the insurance premium each month.
#4 Fannie Mae 3% Down HomeReady Mortgage
Fannie Mae also offers the HomeReady loan that will offer you low rates and has a down payment as low as 3%. This conventional loan down payment is very aggressive and typically the pricing is very competitive as well.
The lending criteria on this loan also are very flexible; one cool thing on this program is that you can use the income of all adults living in the house to qualify for the home loan.
There are not as many 100% financing loan products on the market as of 2017 as a decade ago. But there are still a few available, and there are plenty of very low down payment loans. If you can put down as little as 3% on a home loan, that really is a very affordable home loan. We recommend that you put down as little as you can on your home loan, and keep your savings account with plenty of cash. There always is a chance that you will incur a major expense on that new home.