There are lots of options out there for home buyers of all types – an alphabet soup of choices. Which one is best? Really, only you can decide. Here is a quick primer of the most common ones that required the least amount of cash to get into a home.
Government backed:
FHA – Government insured in the event that the borrower defaults. The allowable down payment is as little as 3.5% and the funds can be gifted from acceptable sources, seller can pay the closing costs and prepaids up to a limit, ratios are generous for debt to income, rates competitve and depending on the lender credit scores can be as low as 580.
Downside is that the loan amounts are subject to certain limits that are set by county, which could limit the selection of homes and prices to the lower end.
VA – A veteran can borrower up to 100% of the purchase price and the VA is always on the look out to help it’s veterans. Closing costs and prepaids can be paid by seller, gifts are allowed. A veteran with full entitlement has no limit in loan amount provided they fit the other guidelines for credit and ratios. There are more details on these but it’s generally a great deal for a veteran.
USDA – More than stamp the meat and produce in your supermarket, the USDA also has a rural home loan program that can be used for 100% purchase in designated areas. There are some rules about how much income can be coming out of a household including people who live in the home even if they aren’t on the loan. Debt ratios are firm and have little give and generally credit score needs to be 640 or better. If you are buying in a rural area this can be a great opportunity to get in with no much money out of your pocket. Funding does run out from time to time and then it’s a matter of waiting for it to be reinstated.
Conventional Options:
HomeReady – This allows for as little as 3% down, flexible ratios for borrowers with solid income history and credit as low as 620 with Much of this is lender specific. Usually requires an short education webinar to be completed by the borrowers to help them understand homeownership. Gifts are allowed. In high cost areas where the loan limits are higher 5% down is required. Loan limits follow the conforming loan limits and vary by county in high cost areas.
Home Possible – As little as 3% down and the ability to obtain a 2nd mortgage where available to help purchase a primary residence. There are limits to borrower income.
Down Payment Assistance – Most of the above programs will work with these. Availability is often subjective to area, income and terms of the DPA must be compatible with lender underwriting guidelines. To find what might be available check the city, county and state resources where the property is located that you wish to purchase. Gather the information and check with your mortgage consultant on putting these together for you. Often funds are limited and must meet a certain criteria for borrower, property, and lending program.
Want to know more? Would love to hear from you or answer your questions about these or any type of loan programs whether you are a first timer or a seasoned investor. Lots of options available.
Have helped buyers of all types and financial levels and worked on 1000's of loans.
There is always something new!
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