Many would be home buyers are anxious to find a home of their own, especially when considering the very low interest rates we are experiencing. The problem these potential home buyers are facing is a lack of funds for downpayment.
When purchasing a home by financing it with a mortgage it is common practice for the lender to require a downpayment. Loans with 20% or more downpayment are less expensive for the borrower because they do not have to pay the mortgage insurance premium (MIP).
The good news is, it is possible to purchase a home with less than 20% downpayment.
In fact, 73% of U.S. home buyers made a down payment of 20% or less, according to the National Association of REALTORS® Profile of Home Buyers and Sellers.
Programs for Home Buyers with Less than 20% Down Include:
FHA loan guidelines will allow for a qualified buyer to purchase with a minimum of 3.5% down. FHA loans also have higher ratios so people who cannot qualify for a conventional loan may be able to do so using FHA.
Be advised, borrowers using FHA will pay an upfront fee for the Mortgage Insurance Premium. This fee insures the lender against the borrowers default. Why? Because when a borrow has little “skin in the game” the lender tends to feel they will walk away from the property if something goes wrong. By charging the borrower this fee, they safeguard their investment.
Programs for Buyers with ZERO down payment
Some qualified buyers are eligible for 100% financing programs. Typically these programs come with additional requirements. The borrower’s income must not exceed certain limits. The borrower will need to participate in a Home Buying Class. Sometimes the programs will come with additional requirements, i.e. the home must always remain a personal residence, meaning the borrower must sell it if unable to live in it. The home cannot be rented.
Some programs involve a grants for the downpayment. These programs have a set of requirements similar to those stated above.
Each county has a different program, so it is necessary to have a general idea of where the borrower intends to live. There are many hoops to jump through, but to a bonafide buyer willing to work with the agency, these programs can make the difference between being able to purchase a home or not.
Available for all Home Buyers – Metro Mortgage Assistance
Last year the Denver metro area had several cities that offered to give home buyers 4% of the mortgage amount. It can be used for downpayment or closing costs. I wrote about it here: Mortgage Downpayment Assistance is Back!
This is a special grant program for low and moderate income individuals and families that seeks to bring the dream of home ownership within reach.
This program is a “first-come, first-served” program, expecting to last for two years. Assuming the money holds out home buyers can benefit by using it through 2014.
VA Home Loans
VA home loans are available t qualified military personnel exclusively. In general, active duty and honorable discharged service personnel are eligible for the VA Program. In addition, home buyers who have spent at least six years in the Reserves of National Guard are eligible, as are spouses of service members killed in the line of duty.
Veterans who qualify can borrow up to 100% of a home’s purchase price and have no mortgage insurance. Interest rates on VA loans are frequently low compared to conventional financing, making a VA loan a very wise choice for a military buyer who has less than 20% to put down on a home loan.
Take Advantage of Low Interest Rates Now
The housing market in Metro Denver continues to be strong. We have many buyers interested in leveraging the remarkably low interest rates into a home purchase this year. IF you have questions about the process or what program might be available to you, please feel free to call, text or email me.
I welcome the opportunity to assist you.