Posted by Apex Home Loans ● November 10, 2021

Low Down Payment Home Loan Options

A young couple sharing a salad in their newly bought home.

It is a commonly held belief that you need a large amount of cash on hand to buy a home. While the traditional 20% down payment conventional loan provides some great incentives, it is often very difficult to save that much cash in a reasonable time frame, even if you can afford the monthly mortgage payments for the home you want. In this blog, you’ll find information on a variety of low and even 0% down payment mortgage options.

1) Federal Housing Administration (FHA) Loans

FHA loans are government backed loans that have a variety of potential benefits for many buyers:
  • FHA loans allow for down payment amounts as low as 3.5%
  • 100% of the down payment can be gifted to the buyer (from eligible sources)
  • Credit score requirements are lower than those of conventional loans, allowing scores as low as 580 (500 if you pay 10% down), though your lender may have higher credit score requirements
  • As an added benefit, interest rates are generally lower than those of conventional loans

Find out whether an FHA or Conventional Loan is best for you in this post by Apex Home Loans CEO Craig Strent.

Get in touch with an Apex Mortgage Expert to find out if an FHA loan is right for you.

 

2) Veterans Affairs (VA) Loans 

Current and former military members are generally eligible for loans backed by the Department of Veterans Affairs. These loans are provided by private lenders, but backed by the VA. Here are some of the benefits of VA loans:

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    Potential for a 0% down payment loan
  • Interest rates on VA loans are generally lower than conventional loans
  • There are no credit score requirements enforced by the VA, although your lender will likely have a credit score requirement
  • There is no mortgage insurance requirement, unlike other low down payment options, though VA borrowers will need to pay a VA Funding Fee (unless exempt from payment of the fee)

Get in touch with a mortgage expert to find out more about VA loans.

Find out about Apex’s Heroes First program, which can save you additional money on your VA loan! The Heroes First program also applies to other community heroes including teachers, police, firefighters, medical professionals and more!

 

3) USDA Loans

The United States Department of Agriculture (USDA) guarantees home loans through the Rural Housing Service for low to middle income buyers in eligible rural or suburban areas. This is another program where homebuyers can purchase a government-backed loan with a private mortgage lender. Benefits of USDA loans include:

  • 0% down payment loan options
  • USDA loans generally have lower interest rates than conventional loans
  • You can qualify with lower credit scores, but must meet USDA/RHS underwriting standards to do so, including qualifying income limits

Get in touch with a mortgage expert to find out more about USDA loans.

 

4) Low Down Payment Conventional Loans 

There are now conventional loan options, such as the Fannie Mae HomeReady Mortgage, that allow for low down payments, although they do require a strong credit history. Benefits of low down payment conventional loans include:

  • Down payment amounts as low as 3%
  • Mortgage Insurance can be cancelled once a certain amount of equity in your home is reached (unlike FHA loans) based on the loan servicer’s requirements
  • Eligible loan amounts may be higher than other programs
  • Cash for down payment and closing costs can come from gifts or grants (from eligible sources)

Get in touch with a mortgage expert to find out more about the Fannie Mae HomeReady Mortgage.

 

5) State and Local Assistance

A wide variety of state and local down payment assistance programs exist to encourage and help people to purchase homes. These include 0% interest loans to use toward down payments, student debt forgiveness programs, grant assist programs, and more. Our future blog posts in this series will focus on specific state and local programs. Click here to see a brief list of some of the programs available in Maryland, Virginia, and DC.

 

 

Bottom Line For Homebuyers

Are you looking to purchase your first home, but you don’t have a 20% down payment? Don’t worry, there are several loans that you can get that don’t require a large sum of cash. For a VA loan, a down payment isn’t required. Connect with our team to see if you qualify for a low down payment loan.

 

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Topics: Real Estate, FHA Loans, Mortgages, Down Payments, Mortgage Loan Information, Down Payment, First Time Homebuyer, Housing Market, VA Loans, FHA vs. Conventional mortgage, low down payment home loans, low down payment, low down payment mortgage, 0% Down Payment

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