Are you ready to buy a home and not sure how much money you will need for a down payment? Check out the various options from no down payment, or up to 20% or more needed for a down payment.
Navigating the mortgage process can be tricky, one of your mortgage down payment options is no down payment.
The VA guarantees mortgages with no required down payment for qualified veterans, active-duty service members and certain members of the National Guard and Reserves. Private lenders originate VA loans, which the VA guarantees. There is no mortgage insurance, required. The borrower pays a funding fee, which can be rolled into the loan amount.
For first-time purchasers, making no down payment. The funding fee is 2.15% for members or veterans and 2.4% for those who qualify through service in the Reserves or National Guard.
For more detailed information, check out the VA Home Loan site.
The Navy Federal Credit Union, the nation’s largest in assets and membership, offers 100% financing to qualified members who buy primary homes. Navy Federal eligibility is restricted to members of the military, some civilian employees of the military, U.S. Department of Defense, and family members.
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%, is less than the VA’s funding fees.
For more detailed information, check out the Navy Federal Credit Union Home Loan site.
The USDA’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.
Some borrowers are surprised to find that Rural Development loans aren’t confined to farmland.
In addition to geographical limits, the USDA program has restrictions on household income, and it is intended for first-time buyers.
The USDA mortgage comes from a bank, and there is no mortgage insurance. Instead, the USDA levies a 2% upfront guarantee fee, which can be rolled into the loan amount, and an annual guarantee fee of 0.5% of the loan balance.
For more detailed information, check out the USDA Home Loan site.
Low down payment is another mortgage down payment options.
Qualified borrowers can make down payments as low as 3% with private mortgage insurance, or PMI. For most borrowers, PMI costs less than FHA mortgage insurance. But PMI has stricter credit requirements. This is not a government backed loan. And is backed by private lenders. It is the most popular mortgage option. You will also need a higher credit score to qualify for a conventional loan of 630+, due to the potential risks involved.
Because of this additional risk to the lender, you’re required to pay private mortgage insurance (PMI) on a conventional loan, if you put less than 20% down.
Once you achieve 20% equity in the home, you have the ability to request the PMI be taken off the loan. Or in most cases, it is taken off by the lender automatically.
With a minimum down payment of 3.5%, the FHA is the low-down-payment option that’s available to people with imperfect credit histories.
The FHA charges an upfront premium of 1.75% of the mortgage amount. On a 30-year loan with the minimum down payment, there’s an annual premium of 0.85% of the mortgage amount, or $850 a year for each $100,000 borrowed — about $71 a month.
For more detailed information, check out the FHA Home Loan site.
In seller financing, the seller takes on the role of the lender. Instead of giving cash to the buyer, the seller extends enough credit to the buyer for the purchase price of the home, minus any down payment. The buyer and seller sign a promissory note (which contains the terms of the loan). They record a mortgage, a “deed of trust” with the local public records authority. Then the buyer pays back the loan over time, typically with interest.
These loans are often short term. For example, the loan would be amortized over 30 years but with a balloon payment due in five years. The theory is that, within a few years, the home will have gained enough in value or the buyers’ financial situation will have improved enough, that they can refinance with a traditional lender.
For homes worth more than $510,000. Your interest rates will be higher and a down payment of 20% is usually required, due to the potential risk.
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