The successful purchase of a home is an achievement of which to be proud, especially when it is a first-time home purchase. But in today's fast moving real estate market, steadily rising prices can leave first-time buyers struggling to save enough cash for the down payment. As the prices climb higher, the amount needed to put the customary ten or twenty percent down also increases, leaving some buyers to watch their dreams of home ownership fade away.
If you are a first-time home buyer caught in the midst of a red-hot real estate market, it may be time to consider one of the following zero- or low-down payment options to help turn your home ownership dream into a reality.
VA and Navy Federal Credit Union home loans
Buyers who qualify for a home loan guaranteed by the Department of Veterans Affairs (VA) or those who qualify to apply for a home loan through the Navy Federal Credit Union (NFCU) are not be required to have a down payment. Additionally, buyers are not required to pay prime mortgage insurance (PMI) on the loan, which further helps ease financial pressure by making the monthly costs of home ownership even more more affordable.
Successful applicants will, however, be required to pay a funding fee, which is currently 1.25 to 3.3 percent of the purchase price for VA home loans and 1.75 percent for those offered through the Navy Federal Credit Union.
When planning to use either a VA or NFCU home loan, buyers should be aware that condition requirements, including a satisfactory home inspection and appraisal, may apply, as well as certain other conditions.
USDA Rural Development home loans
Some buyers may not have previously considered using this home loan option because of a common misconception that it is only for rural farms and properties. Instead, the United States Department of Agriculture (USDA) Rural Development Home Loan Program guarantees home loans in specific geographic areas in order to help make home ownership more affordable for low-income buyers in these areas.
Rural Development loans require that any home purchased meet specific guidelines, including location, size, condition, and appraisal value. Properties must also meet basic health and safety guidelines. A special appraisal and inspection process is required to ensure these are met, before the loan is granted.
USDA Rural Development mortgages are available in two types. The guaranteed type is available through a wide variety of banks and mortgage lenders, with the loan being guaranteed through the Department of Agriculture. Applicants will need to meet certain income, debt-to-income (DTI) ratios, credit, and employment guidelines.
The second type of USDA Rural Development home loan is called the Single Family Housing Direct option. Applicants for this type will make application directly to the USDA through one of their local offices and if their loans are approved, their mortgage will be funded directly from the USDA. The direct option is particularly useful for buyers who have very low incomes and other issues that might make obtaining other loans impossible.
FHA home loans
Home loans guaranteed by the Federal Housing Administration (FHA) have been a favorite resource for first-time home buyers for decades. In addition to having minimum down payment requirements that start at just 3.5 percent, these loans can be easier to obtain for those with blemished credit and other issues that often limit the ability to obtain an affordable home mortgage. Applicants should know, however, that FHA home loans do require an upfront mortgage premium of 1.75 percent of the amount of the loan.
FHA home loans are offered through approved mortgage lenders and banks in a process that is similar to those of most other home loans. This process includes appraisal and condition requirements, to ensure that the home being purchased will be affordable for the buyer to maintain after the sale.
For additional details about these loan options and how they compare to conventional home loans, prospective buyers should begin their home search by having a frank conversation with their real estate agent regarding their current financial status and housing situation. Their agent can use this information to assist in determining which loan options will be best suited for their buying situation.Share
21 February 2018
About a year ago, I realized that there were some serious issues with our home. I could tell that we needed to do something to upgrade our residence, so we started looking for a different property. I was able to find a really nice real estate agent who could help, and they worked hard to pair us with the perfect home for our budget and lifestyle. Now I can honestly say that I love my home, and I couldn't have chosen a better one on my own. Check out this blog for great information on improving real estate holdings and finding a better home.