5 Mortgage Options for First-Time Home Buyers (without the 20% downpayment)
Are you looking to purchase your first home but struggling to save the 20% down payment? For first-time buyers, money often stands in the way of home ownership. But with the number of low-down payment mortgage options available today, it doesn’t have to! We asked Dave from The Leeder Group at Inlanta Mortgage to give us the low down on the options out there and he gave us five great loan options to help you get a mortgage and into a home of your very own. Take it away Dave!
Perhaps the most popular option is the FHA loan. Designed primarily for first-time homebuyers, it allows you to put as little as a 3.5% down payment AND allows for a less-than-perfect credit score. FHA mortgage loans are very competitive because the Federal Housing Authority (FHA) is the one who insures your mortgage, allowing your lender to provide loan terms that can make it easier for buyers to qualify. Other benefits may include:
lower closing costs
down payment can be gifted to the homebuyer
available on 1-4 unit properties
cash reserves not required
closing costs can be paid by seller
flexible qualifying debt to income ratios
streamline refinance available
Have you served or currently serving our country as part of the armed services? Veterans or active duty military personnel may qualify for a VA loan option that waives the private mortgage insurance (PMI) requirements, offers less stringent credit requirements than conventional mortgage loans, and has a low- or no-down-payment option.
If country living is more of your preference, then a USDA Rural Development home loan could work for you. This program, designed to help lower income individuals or households purchase homes in rural areas. Eligibility is based on income and property location. In addition, USDA applicants must have reasonable credit histories or, at least, should show that they have overcome past credit challenges. USDA does offer low to no down payment options, making it a great option for first time homebuyers looking to purchase in rural markets.
Home Possible® Loans*
The Home Possible Mortgage program offers low down payment options and flexible credit terms, making it easier for first-time homebuyers and low- to moderate-income borrowers purchase the home of their dreams. Additionally, if you’re a community worker such as a law enforcement officer, firefighter, teacher, health care worker or member of the U.S. Armed Forces, you could qualify for added flexibility when buying a home in the neighborhood where you serve. Home Possible Loans offer:
Low down payment options (as low as 3%)
Flexible credit terms
Stable monthly payments with fixed-rate mortgages
Reduced mortgage insurance coverage levels
Waived or lower qualifying income requirements
No-cash out refinancing
Flexible closing cost funding options
*Homeownership education is required for first-time homebuyers for purchase transaction Home Possible Mortgages.
HomeReady Loan Program
Similar to the Home Possible mortgage, the HomeReady mortgage option is built for today’s first-time buyer. Benefits to this program include a required down payment as low as 3%, cancellable mortgage insurance once home equity reaches 20% to help lower monthly payments, and flexible funding meaning cash for down-payment and closing costs can come from multiple sources including gifts, with no minimum personal funds required. Ideal HomeReady borrowers meet the following requirements:
Have low to moderate income
Are first-time or repeat homebuyers
Have limited cash for down payment
Have lower credit scores (as low as 620)
Have supplemental boarder or rental income
Are looking to purchase or refinance
If you’re looking for a home in Wisconsin with low cost financing, you may qualify for a WHEDA (Wisconsin Housing and Economic Development Authority) special program. The WHEDA mortgage is designed to help make homeownership attainable to Wisconsin residents by offering loan programs tailored to meet individual needs – whether you’re a first-time buyer or repeat buyer looking to purchase or refinance. WHEDA’s First Time Home Buyer (FTHB) Advantage program offers a fixed-rate mortgage priced below the standard conventional interest for qualifying purchasers. To learn more about the programs offered by WHEDA, visit their website today.
Start with your Mortgage Lender
Buying your first home is a huge investment, probably the most significant purchase of your life to date, and it’s important to be prepared. Before beginning your search, meet with your mortgage lender first to learn more about all the mortgage programs you may qualify for to find the right mortgage for you and your budget.