First-time home buyers and those who are financially disadvantaged may not be able to put down the 20% needed for a conventional loan on a house. It can be difficult to save up the money, and so there is a need to seek out mortgage loans that allow you to put little to no money down in order to have ownership of the house. Fortunately, there are several options for you to choose from:
USDA (US Department Of Agriculture)
The USDA offers mortgages to people without any money down whatsoever. If your loan is for a rural home in an eligible area designated by the USDA,and your property is the only real one you own (i.e. it is not for second homes and investment properties), it is a fantastic option for home buyers. You will be surprised to see that your desired home is much closer to major urban areas than you think! In some cases, it may even be a better option to buy the home you want to move into than to pay for the same home on a rental basis.
Although it is primarily designed for first-time home buyers, other individuals with a low to average annual income may easily qualify for this type of loan. As a caveat, your income must be equivalent to 115% or more of your local area’s median income.
With more than a million enthusiastic individuals using this government-sponsored loan to finance their home, the USDA loan is becoming increasingly more popular as a way to get a home loan with zero down payment. Add on the fact that credit scores as low as 640 will allow you to be eligible, and you have an affordable approach towards home ownership.
VA (Veteran’s Affairs)
Without question, this is the go-to option for US veterans who have served in the military and are seeking for a friendly, cost-friendly mortgage loan that will allow them to become happy home owners. Just like the USDA loan, there is zero down payment and there are no insurance payments whatsoever. Given that many other loans add on pricey insurance costs that need to be paid throughout the entirety of the loan, the VA loan is definitely a stand-out option. Guaranteed by the US Department of Veteran Affairs, it is the best option for those who are eligible to receive it. And seeing as 7-8% of all Americans have served in the US military at some point in their lifetime, millions of people can take advantage of all the benefits offered by this loan.
Additionally, credit scores as low as 580 will allow veterans to still remain qualified for this mortgage loan. Add on the higher debt-to-income ratios that are permissible for home buyers, and you have hands-down one of the most affordable mortgage options in the real estate industry. Manufactured homes are also permissible, and you get to have a choice between taking on a fixed-rate mortgage or an adjustable-rate mortgage. Even if you have been bankrupt and/or foreclosure (minimum of 2 years ago at the time of approving the loan), you can still be eligible for the VA loan.
FHA (Federal Housing Administration)
Although this FDA-backed mortgage loan is not a zero down payment option like the previous two, you only need to put down as little as 3.5% of the home purchase price in order to have ownership. First-time home buyers and low-income individuals will find this option especially attractive, as you do not need to have a perfect credit history in order to qualify. Scores as low as 620 will not make you ineligible.
While there are some insurance payments that come with FHA loans, they are certainly not out of reach for home owners and they are considerably lower compared to what you would pay for a conventional loan. Best of all, you can even cover the down payment with a gift from non-profit, a family member or any other eligible source of down payment. So long as your home is FDA-approved, you have a wide range of homes and condos to choose from!
Which Loan Will Be Best For Me?
Although many of the loans listed above are primarily geared towards first-time home buyers, don’t think that you can’t qualify yourself for them too. With that being said, you need to take into account certain factors.
For one, you need to have some kind of long-term plan to pay off your mortgage loan. Despite the lower barrier to entry, you may end up paying for your home for a longer period of time compared to other mortgage options. You also need to consider things such as insurance costs, as each type of loan comes with its own rules and conditions under which you must provide payment beyond the loan itself.
Another key factor to consider is your current financial situation. If you are able to secure a job that provides a steady and predictable income over several years, you will be in a better position to cover 100% of the loan over time.
Let Us Lend and our qualified mortgage lending partners, can help you find a loan that is the right fit, having decades of experience in helping veterans, first-time homebuyers and the credit challenged. If you feel you’re ready and want to move forward with purchasing a home, click the button below and let’s see how we can help you complete this life goal!