Options for Buying a Home with Little Down Payment
There are many potential home buyers who want to buy their dream home, but can’t afford a large down payment. Therefore, I have compiled a list of options that can help you buy a home with little down payment. Believe it or not, there are mortgage options for people with little cash reserve. You can still acquire a mortgage for 5% down or less.
FHA Mortgage – This is one of the more popular mortgages for a low-down payment. You can acquire an FHA mortgage for as little as 3.5% down and your choice of homes is much larger than the conventional loan route. While there are limits on the amount you can borrow, you can still buy a really nice home valued at $250,000 up to $700,000.
The FHA will charge 1.75% of the borrowed amount for an upfront insurance premium, and there will be an additional annual premium that can be as much as 1.25% of the loan balance each year. You can reduce this by a larger down payment or a short-term loan.
Conventional Mortgage – Conventional mortgage basically means a mortgage loan that conforms to the guidelines of Fannie Mae and Freddie Mac. You can get a home up to $400,000 in most of the country and up to $625,000 in high-cost home markets. You can also get these mortgages for 5% down. However, if your credit score is not what the lender wants to see, they will require at least 10% down payment.
Fannie Mae offers the HomePath program that allows a small down payment of 3%, and Freddie Mac offers HomeSteps that allows a 5% down payment. Both programs allow you to forgo the mortgage insurance payment. These programs are the best for those buyers with less than perfect credit.
VA Mortgage – Many veterans or active duty service members can qualify for a VA mortgage. They also have the best possible deal around. You can purchase a home with no money down and no mortgage insurance. The mortgage rates are also very good. Your loan or part of your loan will be backed by the government to provide you with the best possible mortgage.
USDA Mortgages – This type of loan, sometimes known as rural development loans, are often overlooked by potential home buyers. You can get a USDA mortgage for 0 down and they offer some of the best interest rates. However, you will be limited to homes in rural areas, some of which you might see as suburb towns.