OfflineHome-buyers with little money for a down payment are finding more home loans available for a low down payment or even no down payment.
These mortgages are becoming more commonplace even as the country recovers from a housing bust made worse by the popularity of low down-payment mortgages during the housing boom.
The Federal Housing Administration insures loans with small down payments. And private mortgage insurers have lowered their down payment requirements.
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It's even possible to get a mortgage today with no money down. The nation's biggest credit union offers "zero-down" mortgages. The Veterans Administration and the Department of Agriculture guarantee home loans with no down payments.
Following are a few options for borrowers seeking low down-payment and zero down-payment home mortgages:
No down payment: VA loan
Veterans Affairs (formerly the Veterans Administration) guarantees no-down purchase mortgages for qualified veterans. Private lenders originate VA loans, which the VA guarantees. There is no mortgage insurance. The borrower pays a funding fee, which can be rolled into the loan amount.
The VA funding fee varies, depending on whether the veteran served in the regular military or in the Reserves or National Guard, and whether it's the veteran's first VA loan or a subsequent one. The funding fee can be as low as 2.15 percent or as high as 3.3 percent.
No down payment: Navy Federal
Navy Federal Credit Union, the nation's largest in assets and membership, offers 100 percent financing to qualified members for buying primary homes. Credit union eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.
Navy Federal resumed zero-down financing in 2010 after a hiatus of a couple of years. Barbara Sheehan, Navy Federal's assistant vice president for mortgage products, says when members of the military are transferred, they sometimes own houses whose values have fallen, wiping out equity.
"Some people had to take losses to sell their houses, so to have to start over and save the money again for a down payment is really difficult," she says.
The credit union's zero-down program is similar to the VA's. One difference is cost: Navy Federal's funding fee of 1.75 percent is less than the VA's funding fees.
No down payment: Department of Agriculture
The Department of Agriculture's Rural Development mortgage guarantee program is so popular that it has been known to run out of money before the end of the fiscal year.
"That's the cat's meow, my favorite loan program," says Jeff Tufford, mortgage consultant for Monarch Mortgage Consulting, in Grand Blanc, Mich.
Some borrowers are surprised to find that Rural Development loans aren't confined to farmland.
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This is a very informative article about the various mortgages, including VA loans and others, that provide home ownership financing with little money down. If you are investing in real estate to turn a quick profit, by all means find ways to finance with no money down, but be sure to take the cost into consideration when determining what to pay for the property. Remember, the less money you put down, generally the more you will pay in origination fees and interest rates, including on VA and other government sponsored loans. If you are looking for a loan to finance your own home for long term, it is wiser to put at least 20% down so that your fees and interest rate is lower. Buy a home you can afford to put 20% down on and pay off over 15 years instead of 30. You will become financially better off if you don’t go into undo debt in order to live a higher life style. Creating financial security in your personal spending habits will help prepare you to become successful in investing in real estate. After you have your house paid off, you can open an HELOC on your home and use it to buy, fix and flip property for a profit, paying the loan down to zero after each project. This way you will pay a low interest rate for seed money in which to invest.
Last year we sold 10 houses, 6 of them having the buyers use USDA mortgages. The best aspect is they will loan 102% of the appraised value of the property & will still let us as the sellers contribute up to 6% concession
towards closing costs. And the borrower only needs a 620 to 640 credit score. The last one we sold for $ 3000 over asking & gave it back at closing for closing costs. Two of the buyers didn't even have to put any of their own money toward the purchase!
The closing costs are less than a FHA, no 3.5% down payment, & no monthly PMI insurance. Closing time is usually 4 to 5 weeks!