How To Buy A House with No Money Down in 2018
Low Down Payment Home Loans For First-Time And Repeat Buyers
The biggest barrier to homeownership today is the mortgage down payment. But it doesn't have to be.
According to the National Association of Realtors, 87% of first-time buyers think they need 10% or more down to buy a home.
That’s simply false.
In fact, the average down payment for first time buyers today is just 6%. And, a number of programs require no down payment at all.
If you’re “stuck” trying to raise enough down payment money, you must read this entire article.
What Is A Down Payment?
A down payment is a portion of the purchase price that a buyer pays from his or her own funds. A 10% down home purchase is structured as follows.
But many loan programs allow you to use a very small down payment or none at all. The 20% down myth is just that: down payments are optional.
Your choice of loan depends on whether you want to make a down payment.
There are certainly benefits of making a down payment.
But there are also drawbacks to making a down payment, especially a large one.
Making a down payment depends on many factors including level of savings and even long-term plans. So what should you do? Keep reading.
From zero down home loans to 10% down, there are many widely available loan options to choose from. All the loans mentioned are available from most lenders in the U.S. Explore all the no and low down payment mortgage options below.
FHA Home Loan
The FHA loan is one of the most popular options due to its lenient requirements.
Down payment required: 3.5%. However, 100% of the down payment can be a financial gift from a relative or approved non-profit.
Eligibility: U.S. citizens and permanent residents are eligible for an FHA loan. You do not have to be a first-time home buyer to qualify.
FHA mortgage insurance premium (MIP) and fees: 1.75% upfront and 0.85% of the loan balance per year, paid in 12 equal installments with the mortgage payment. On a $200,000 loan, that’s $3,500 upfront and $141 per month. The upfront fee can be rolled into the loan amount and does not need to be paid in cash.
FHA monthly mortgage insurance is non-cancellable without a refinance. This is one disadvantage of FHA compared to conventional loans, mortgage insurance for which can be removed when the home reaches 20% equity. To cancel FHA mortgage insurance, you must refinance into a conventional loan.
Credit: This is where FHA loans shine. You don’t need perfect credit or anywhere near to qualify. Some lenders approve FHA loans to borrowers with FICO scores down to 580. Some lenders may require a 620 score, though.
FHA mortgage rates: Thanks to solid government backing, lenders can offer FHA mortgage at rates much lower than for conventional loans. According to mortgage software firm Ellie Mae, FHA rates run about 0.15% lower than conventional ones.
Who is this loan good for? About 40% of home buyers under 37 use FHA, but plenty of older buyers choose it, too. This loan is best for those who don’t want to put a lot down, but still want great rates and flexible credit requirements.
VA Home Loan
The VA home loan is a zero down mortgage option for home buyers with current or former military service. It’s often the top choice for for those eligible because it offers 100% financing and does not require great credit.
Zero down payment mortgage: 0%. VA loans require no down payment, but those who wish to can make put any amount down.
Eligibility:Eligibility is based on current or former military service. Required service requirement is typically 90 days if currently serving, or two years on active duty if separated from service.
Those in the Reserves or National Guard are eligible after six years of service.
VA mortgage insurance and fees: Typically, 2.15% upfront fee is required for first-time home buyers putting less than 5% down. If you’ve used a VA loan before, your upfront fee increases to 3.3% of the loan amount. Veterans receiving benefits for injuries sustained on duty are exempt from the funding fee.
VA loans do not require monthly mortgage insurance – a potential savings of hundreds of dollars per month. This allows home buyers to afford a more valuable home.
Credit: Required FICO scores are usually 620 and above, although some lenders will allow lower credit scores. VA does not officially publish a minimum score for the program.
VA mortgage rates: VA mortgages come with some of the lowest ratesavailable anywhere. Rates run almost one-half of a percentage point below conventional rates according to Ellie Mae.
Who is this loan good for? The VA loan option should be the first loan type that military veterans consider. With no monthly mortgage insurance, lenient credit requirements, and low rates, eligible home buyers are often surprised they can buy a home – and with zero down, too.
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