Four Loan Programs That Require Little or No Money Down

Steve Khan's picture
Home Loan

With the spring home buying season upon us now is the time for prospective home buyers to make their home financing plans among the many options available. Hopefully home buyers have spent the winter evaluating neighborhoods, learning about area schools and driving neighborhoods where they may want to live. Now comes the time to decide how to pay for that dream home.

Luckily home buyers have several options for purchasing their dream home and many of the options involve the home buyer putting little or no money down to purchase the home. As long as a prospective home buyer has done their homework up front and has managed their credit well, maintained a manageable debt level in relation to one’s income, and is continuing with their steady employment then doing these things puts the home buyer in a position to take advantage of several available loan programs.

It is advisable with any loan program that the home buyer has some money saved so they can show their lenders underwriters that they can maintain a sustained level of financial responsibility by saving money when needed to make a big purchase. For example, what if you buy a home and the home needs a major repair down the line. As a homeowner that repair cost falls on you so developing strong saving habits is important leading up to one’s home purchase and of course especially once the home purchase transaction closes.

Have a look at some of the home loan options that require little or no money down:

1. FHA mortgage loans: the FHA home loan is a great option for first time home buyers because this loan program only requires a down payment of 3.5% of the purchase price. FHA loans also allow lower credit scores than conventional loans and the underwriting guidelines are quite forgiving for those that have past credit “events” that may still show on one’s credit report.

2. Conventional mortgage loans: the standard down payment required on a conventional home loan is 5% of the purchase price. The nice thing about conventional loans is that mortgage insurance rates are more attractive than FHA loans for those putting at least 5% down and the mortgage insurance can be removed when a borrower reaches an 80% equity position.

3. VA mortgage loans: these home loans for our military veterans have some of the best mortgage rates offered normally. If a veteran is eligible to use their home loan benefit, a VA home loan requires no money down, coms with no mortgage insurance, and normally has more competitive interest rates than either FHA or conventional loans.

4. USDA mortgage loans: these mortgage loans are loans backed by the US Department of Agriculture and they are made in eligible areas as defined by the USDA. Prospective home buyers must buy a home located in an eligible area and must meet the income requirements as stated in the programs guidelines. For those who meet these requirements the USDA mortgage loans are great no money down mortgage loans for borrowers to use to buy a home.

For more detailed information on available loan programs visit our Loan Programs website page.

Stephen Khan is a Mortgage Lender with Guaranteed Rate and based in Chandler, Arizona.

Comments

Thanks #Stephen Khan for a great article on Mortgage Loan Programs That Require Little or No Money Down! I will be sure to share this on my social media connections

Submitted by nccoup7 (not verified) on
I didn't know no-money-down mortgages still exist. Isn't this what brought our economy down in 2008? Are we going back to the same circle? Your story is a well written and useful story Steve, but how do these agencies reason the no money down mortgages?

Submitted by Steve Khan on
Great question about no money down mortgages. The loan programs where 100% financing is still a possibility are very targeted and specialized programs. The difference between today and the housing market before the downturn is that much of that prior activity was aimed at the broader market. Much different times now. Tighter, more realistic lending standards make for more qualified borrowers getting in to homes. Again, great question!

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