A large down payment shouldn’t be what keeps people from buying a home they really want. There are some special programs that might be able to get you a loan with as little as zero to $100 down. It comes with a little bit of a cost, but it might be worth it in the long run.
President of ALV Mortgage in Salt Lake City, Utah, Anthony Van Dyke said, “These programs typically come with a higher interest rate, but for the right borrow [they] are a great alternative to renting.” The reason for such a high rate is because of the potential risk for lenders as borrowers put less money down in a home purchase. Moreover, the lower the down payment, the higher the monthly payments will be because you are going to be borrowing more money. When you put down less than 20% that means you will have to pay mortgage insurance on top of your regular monthly payments. The mortgage insurance protects the lender in the event of the borrower defaulting on the loan.
If you can handle those costs to help you get the house of your dreams, then there is yet to know more about these programs. Here are the four mortgage options that require little or no down payment:
- FHA $100-Down Program
- FHA Down Payment Assistance Programs
- Zero Down VA Home Loan Program
- USDA Home Loan
Option #1: FHA $100-Down Program
In this mortgage program, the buyers will only put down $100. However, they may also be responsible for some of the closing costs. The closing costs may be about $2,400 with the costs of a home inspection, legal fees, and other items.
Another catch to this program is that borrowers using this program are restricted only to buying a HUD foreclosure. What is an HUD home foreclosure? HUD stands for Housing and Urban Development. The official HUD website describes it like this, “A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.”
Moreover, buyers may pay more money than necessary for the home if there is a bidding war going on for it. For example, if the HUD appraised value of the property is $100,000, but the winning bid is $115,000, the buyer must bring both the $100 for the down payment plus the $115,000.
Option #2: FHA Down Payment Assistance Programs
According to the U.S. Department of Housing and the HUD website, with a FHA loan, your down payment can be only 3.5% of the purchase price of a house. If that’s out of your budget, you may be able to go even lower with an FHA Down Payment Assistant Program.
Van Dyke says that FHA allows government entities and non-profit organizations to issue second mortgages to help cover the required 3.5% down payment. Usually, the loan borrower must pay back the money by making payments on a low-interest rate loan.
There are different types of down payment assistance programs. Some are geared specifically towards one profession. Some are given to police officers. Others are given to teachers, or veterans, or firefighters. Phil Georgiades, chief loan steward of the VA Home Loan Centers, said that there are assistance programs out there that are designed for homeowners earning less than the median income of the area where the home is located. It’s just a matter of finding them. “The down payment assistance funds can be used with any loan type, including FHA, VA, USDA, or conventional,” he said.
Beware. There are some limitations to these FHA down payment assistance programs. Some include the fact that non-occupant borrowers (also known as co-signers) are unable to qualify for this program. Also, there is a limit to the purchase amount of the home. The borrower must have a credit score of at least 640. Lastly, borrowers must show that they own something of value in $1,500 in assets.
Ace Mortgage Loan Corporation in Coral Springs is a home financing company that can assist those in Coconut Creek, Boca Raton, or Pompano Beach who would like to get a home loan. The mortgage lenders at Ace Mortgage will discuss all that needs to be noted before you can be able to get a mortgage. Our mortgage loan experts will assist you with any of these two programs that require $100 or less down. Call us today!