Low Down Payment Options for Mortgaging a New Home
Lots of people are in a situation where it could take years to save enough to make the down payment on a home. Luckily, there are various options you can take advantage of that will allow you to get a mortgage while paying less than the standard 20% down. Keep reading to find out more!
A Variety of Loan Options
If you are looking for a low down payment option, odds are you will be going with one of these three:
The first is an FHA. An FHA is available to anyone looking to buy a home they plan on living in as their primary residence. Those looking to take advantage of refinancing can also use an FHA. The second is a VA, which stands for veteran affairs, and any military veteran, active duty, or reservist is eligible. Once again, the VA can be used for a purchase or to refinance. The third loan is from the USDA. The USDA is restricted to low and moderate-income borrowers and only applies to property located in rural areas.
Each option requires a minimum credit score of 640, so be sure to stay up-to-date on your credit score and find ways to increase it if you are not at 640 yet. The FHA loan requires a minimum of 3.5% down, a huge difference from the standard 20%. The VA can provide up to 100% of the financing needed for the purchase or to refinance but requires a Certificate of Eligibility. The USDA loan also provides up to 100% of financing. So, although it is the most restrictive it can also provide amazing financing for borrowers moving to rural areas.
With an FHA loan, you do not have to be a first-time home buyer, and the loan can be used up to a maximum of $970,800. However, this maximum amount only comes into play when using a fixed-rate mortgage. Keep in mind that you will have to pay mortgage insurance premiums with an FHA loan. This is a requirement instituted by the Department of Housing and Urban Development, and it carries on throughout the lifetime of the loan. You can escape having to pay mortgage insurance by refinancing into a conventional loan. The monthly premium can be anywhere between .45% and 1.05%, as well as 1.75% upfront.
As the name suggests, USDA loans are guaranteed by the US Department of Agriculture. You will have to verify if your income level qualifies you for the loan by going to the USDA website and using their analyzer, as well as checking if the area qualifies as rural. Mortgage insurance premiums for the USDA loan are 1% per month and .35% of the loan balance annually.
The VA loan has a one-time closing fee assessed upon the closing of the loan, and the percentage here is anywhere from 1.25% to 3.3%.
At Equity Mortgage, we work with a variety of clients with varying degrees of mortgage needs. We offer our clients alternative options to their current loan programs with our wide range of mortgage products and flexible lending practices.
Experience fast, professional service for coronavirus mortgaging today and into the future. Contact us for more info or give us a call at 1-800-332-9221.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.