Do you want to achieve the dream of homeownership but dread the looming down payment you’ll need? Figuring out how to come up with a down payment for a house can seem like a huge hurdle, especially for those with little to no savings.
Conventional loans can require as much as a 20% down payment, but did you know there are many loan programs available, some of which require a minimal or even no down payment at all? It’s important to understand the different loan options available. Find out more about each of these low or no down payment programs and determine what you might qualify for.
Local Down Payment Assistance Programs
Many state or local down payment assistance programs reduce or eliminate the need for a down payment. They often come in the form of an interest-free, “silent” second mortgage that doesn’t need to be repaid until the house is sold, refinanced, or paid in full.
One good example is the California Housing Finance Agency (CalHFA) MyHome Assistance Program, which offers a second loan up to 3.5%* of the purchase price or appraised value to help with down payment and/or closing costs.
Programs vary by state and city, and there are often several different options. To find down payment assistance programs near you, contact your state’s Department of Housing and Urban Development (HUD).
Freddie Mac Home Possible Advantage(SM)
The Home Possible Advantage program is attractive because it allows for a low down payment and flexible sources of funds to qualify. In addition to flexible funding, it provides up to 97% financing and offers down payment assistance programs, which can be through a silent second mortgage.
HomeReady by Fannie Mae
As an alternative to an FHA loan, HomeReady is a conventional 3% down* loan with even more flexible income qualification guidelines. In addition, HomeReady may have reduced mortgage insurance options, including no upfront mortgage insurance fees and may be cancelable per servicer/Fannie Mae guidelines. Gift funds or community seconds are also allowable for the down payment.
FHA Loans
FHA loans are specifically designed to help first-time borrowers get into homes. Because these loans are insured by the Federal Housing Administration, and come with a government guarantee, lenders are more willing to have flexible qualifying guidelines.
With an FHA loan, the down payment can be as low as 3.5%* and can be provided from a family member in the form of gift funds. Credit scores as low as 600, flexible credit allowances, and seller contributions are all allowed with an FHA loan.
APM also offers the newer FHA Within Reach loan program, which is specially designed to make it easier for buyers who don’t have a large down payment saved up to buy a home. This program includes down payment assistance in the form of a forgivable loan and is paired with a traditional 30-year mortgage. It can often help buyers in higher-cost areas buy a home.
VA Loans
VA loans are available to veterans, actively serving military personnel, and surviving spouses of veterans. They are government-backed and encourage lenders to offer financing with more lenient qualifying guidelines.
VA loans offer up to 100% financing without mortgage insurance. Veterans can qualify for a VA loan with suitable credit, adequate income, and a valid Certificate of Eligibility.
USDA Loans
USDA loans allow for a loan with no down payment. These loans are government-insured loans for rural property outside of major metropolitan areas, but it’s important to ask because many of the areas approved for this loan type aren’t what many of us would consider “rural” at all!.
The requirements for a USDA loan are very specific, so our specialized loan advisors at American Pacific Mortgage can help determine if you qualify under the current USDA guidelines.
USDA loans offer up to 97% financing and loan limits vary widely by county—as low as $285,000 in some and up to a whopping $657,000 in others. It’s important to note that only fixed-rate options are available and the property must be the owner’s primary residence.
Saving for a down payment may seem overwhelming, but with the variety of programs available, we are confident that we can help find a loan program that meets your needs. Talk with Your Mortgage Sensei today to learn more about down payment options and find out which ones you may qualify for.
