Can you buy a house with little to no money down?

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Can you really buy a home for little to no money down? Yes, you can!

How? Let me share with you a few different ways you can buy a home with little to no money down.

1. Government Grants through Federal and California Housing Finance Agency

CAL HFA and other government grant programs will help you with your down payment if you qualify for the programs. You will need to also take a full day home buying class, which is completely worth it if you can save up to $15,000.

2. No Down Payment Mortgage

A no down payment mortgage allows first-time home buyers and repeat home buyers to purchase property with no monies required at closing. Other options, including the FHA loan, the HomeReady™ mortgage and the Conventional 97 loan offer low down payment options with a little as 3% down. Mortgage insurance premiums typically accompany low and no down payment mortgages, but not always.

The Down Payment Hurdle

However, it’s not the monthly payment that scares off new buyers these days — it’s the prospect of having to put 20% down.

Buyers are earning good incomes, but few have much saved in the bank.

The good news is that there are a bevy of mortgage programs requiring little or no money down and they’re available to the general public — no hoops required.

Want to buy a home with little or nothing down? You can.

Home Buyers Don’t Need to Put 20% Down

In today’s U.S. housing market, home buyers don’t need to make a 20 percent down payment. Many believe that they do, however (despite the obvious risks).

It’s a common misconception that “20 Percent Down” is required to buy a home. And, while that may have true at some point in history, it hasn’t been so since the advent of the FHA loan, which occurred in 1934.

The likely reason why buyers believe a 20% down payment is required is because, with one specific mortgage type — the conventional mortgage — putting twenty percent down means private mortgage insurance (PMI) is not required.

PMI Is Not Evil

Paying PMI is neither good nor bad, but consumers seem to abhor it.

The purpose of private mortgage insurance is to protect the lender in the event of foreclosure — that’s all it’s for. However, because it costs money, private mortgage insurance gets a bad rap.

It shouldn’t.

Because of private mortgage insurance, home buyers can get mortgage-approved with less than 20 percent to put down and, eventually, private mortgage insurance can get removed.

At the rate at which today’s homes are increasing in value, a buyer putting 3% down would pay PMI for fewer than four years.

That’s not long at all. Yet, many buyers — especially first-timers — will put off a purchase because they want to save a larger downstroke.

Meanwhile, home values are climbing.

For today’s home buyers, making a down payment should be consideration, but it shouldn’t be the only consideration.

This is because home affordability is not about the size of your down payment — it’s about whether you can manage the monthly payments and still have cash left over for “life”.

A large down payment will lower your borrowed amount and, therefore, will give you a smaller monthly payment to make each month. However, if you’ve depleted your life savings in order to make that large down payment, you’ve put yourself at risk.

Loan Programs & Assistance

1. No Down Payment: VA Loans (100% Financing)

The VA loan is a no-money-down program available to members of the U.S. military and surviving spouses.

Guaranteed by the U.S. Department of Veteran Affairs, VA loans are similar to FHA loans in that the agency guarantees repayment to lenders making loans which means VA mortgage guidelines.

2. No Down Payment: USDA Loans (100% Financing)

No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage. The program is formally known as a Section 502 mortgage, but, more commonly, it’s called a Rural Housing Loan.

The good news about the USDA Rural Housing Loan is that it’s not just a “rural loan” — it’s available to buyers in suburban neighborhoods, too. The USDA’s goal is to reach “low-to-moderate income homebuyers”, wherever they may be.

3. Low Down Payment: FHA Loans (3.5% Down)

The FHA mortgage is somewhat of a misnomer because the FHA doesn’t actually make loans. Rather, the FHA is an insurer of loans.

The FHA publishes a series of standards for the loans it will insure. When a bank underwrites and funds a loan which meets these specific guidelines, the FHA agrees to insure that loan against loss.

FHA mortgage guidelines are famous for their liberal approach to credit scores and down payments. The FHA will typically insure a home loan for borrowers with low credit scores so long as there’s a reasonable explanation for the low FICO.

The FHA allows a down payment of just 3.5 percent in all U.S. markets

Other benefits of an FHA loan are :

Your down payment may consist entirely from “gift funds”

Your credit score requirement is 500

Mortgage insurance premiums are paid upfront at closing, and monthly thereafter

Furthermore, the FHA supports homeowners who have experienced recent short sales, foreclosures or bankruptcies through the agency’s Back to Work program.

The FHA insures loan sizes up to $636,150 in designated “high-cost” areas nationwide. High-cost areas include Orange County, California; the Washington D.C. metro area; and, New York City’s 5 boroughs.

4. Low Down Payment: The HomeReady™ Mortgage (3% Down)

The HomeReady™ mortgage is special among today’s low- and no-downpayment mortgages.

Backed by Fannie Mae and available from nearly every U.S. lender, the HomeReady™ mortgage offers below market mortgage rates, reduced mortgage insurance costs, and the most innovative underwriting idea on more than a decade.

Via HomeReady™, the income of everybody living in the home can be used to get mortgage-qualified and approved.

5. Low Down Payment: The “Piggyback Loan” (10% Down)

The “piggyback loan” program is typically reserved for buyers with above-average credit scores. It’s actually two loans, meant to give home buyers added flexibility and lower overall payments.

The beauty of the 80/10/10 is its structure.

With an 80/10/10 loan, buyers bring a ten percent down payment to closing. This leaves ninety percent of the home sale price for the mortgage. But, instead of giving one mortgage for the 90%, the buyer splits the loan into parts.

There are many options to choose from.

We are here to help.

CALL US TODAY TO SCHEDULE A FREE, NO OBLIGATION CONSULTATION. 760-310-0166

We are here to help you make your home buying dreams come true!!