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Getting a mortgage without 20% down

Find a home loan with little or no money down

How long have you been saving up for a down payment? Weeks, months, years? It can feel like homeownership is just out of reach. But, surprise! There are multiple loan options to get you into a new home with little or no money down.

A down payment is the first payment toward your new home, paid as cash at closing. A 20% down payment is typical. For example, if you’re purchasing a $200,000 home, you’ll provide $40,000 at closing. That’s a hefty cost! Many buyers are unable to offer such a large sum upfront. If you’re in the same boat, check out these loan programs with low or no down payment advantages so you can take the next step toward homeownership.

USDA Loans

USDA loans are insured by the U.S. Department of Agriculture. Government-backed loans provide more payment security to lenders, allowing them to loosen the qualifications for borrowers. USDA loans are available for low-to-moderate income individuals in specific rural or suburban areas with a minimum FICO® score of 640. Review the USDA’s eligibility map to see if your location qualifies. Borrowers are required to pay private mortgage insurance, in addition to monthly mortgage payments.

Benefits:

  • No down payment
  • No maximum purchase price
  • Below-market interest rates
  • Fees can be added to the loan balance at closing

VA Loans

VA loans are backed by the Department of Veterans Affairs. You may qualify if you are an active servicemember, veteran, or surviving spouse, or if you have served six years in the Reserves or National Guard. There is a one-time funding fee, which can be added to the loan amount or waived in some instances.

Benefits:

  • No down payment
  • No maximum purchase price
  • No private mortgage insurance

FHA Loans

FHA loans are insured by the Federal Housing Administration. Borrowers with a minimum credit score of 580 can qualify (First Federal Bank requires a 620 minimum), and a down payment of at least 3.5% is required. FHA loans are also available for homeowners who experience short sales, foreclosures or bankruptcies. Borrowers will pay private mortgage insurance for the life of the loan if they put down less than 10%.

Benefits:

  • Low down payment, which can be gifted
  • Lower credit score requirement
  • Higher debt-to-income ratio

Conventional Loans

Finally, there’s the typical conventional loan. The Conventional 97 program allows borrowers with credit scores of at least 620 to get a loan with just 3% down, but this will require private mortgage insurance. The PMI fee will decrease with down payments of 5%, 10%, and 15%. Once you’ve reached 20% equity in your home, PMI can be removed. This program is intended for first-time home buyers who haven’t owned a home in the past three years.

Fannie Mae also offers the HomeReady mortgage, which is similar to the Conventional 97, but it requires first-time buyers to take homeownership education courses as well.

Lastly, borrowers can elect to pay a single mortgage insurance premium, which can be paid at closing by the buyer or seller, or financed in some scenarios. This is beneficial because the premium is a reduced amount, and without a monthly PMI fee, the total payment over the life of loan is much less.

Benefits:

  • Down payment and PMI flexibility
  • Higher loan limits


If you’re wondering which loan type is the best for your situation, get in touch with one of our mortgage lending advisors today!

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