The Home Buying Myth

In the aftermath of the housing crisis, many home buyers believe that a 20% down payment is needed to purchase a home. This is not the case! There are numerous products and resources you can access to get into your first home with a low down payment or no down payment. There are even some state and local resources that will cover your down payment and closing costs. Below is information that will help you navigate the home buying process and figure out which products are right for you.

FHA Loan

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.

FHA loans are a helpful tool for homebuyers as they are easier to qualify for and have some advantages over conventional mortgages. FHA loans could be the key to getting into your first home. Your down payment can be as low as 3.5% of the purchase price, you are able to borrow with a lower credit score, and your debt-to-income ratio can be higher than with a conventional loan. The following are FHA resources that will help you navigate the home buying process.

• Home Economics-Affording your first home
• Fair Housing-Know your rights
• Real Estate Settlement Procedures Act-RESPA
• Know Before You Owe-CFPB’s mortgage initiative
• Looking for the Best Mortgage

HUD’s Special Home Buying Programs:

•  Good Neighbor Next Door
•  Homeownership for Public Housing Residents
•  Indian Home Loan Guarantee Program

Fannie Mae and Freddie Mac Low Down Payment Mortgages

Fannie Mae and Freddie Mac were created by Congress, and they perform an important role in the nation’s housing finance system. Through Fannie Mae and Freddie Mac, you can access mortgages that require a down payment as low as 3%.

Click here to learn more about Fannie Mae’s 3% down payment mortgages to help first-time homebuyers who can’t afford a large down payment but are otherwise qualified for a mortgage.

Click here to learn more about the resources Freddie Mac has for those looking to rent, buy or own a home.

Lease-to-Own

There are a number of reasons it may be difficult for first-time home buyers to come up with the down payment for a home. The lease-to-own purchase model is a good option for buyers who need time to build credit and save for a down payment.

Trio is a lease-to-own financing program that partners with government agencies in the markets where it uses FHA mortgages that are then assumable to qualified consumers. Learn more about Trio’s lease-to-own program here.

Down Payment Assistance Resources

There are hundreds of state and local resources available to help you may your down payment. Down Payment Resource can help you check your eligibility and give you a listing of which resources are available in your community.

No Down Payment Loans

There are a few loans out there that require no down payment for those who qualify.

The VA Loan requires no down payment for qualified veterans, active-duty service members and certain members of the National Guard and Reserves. There is no mortgage insurance and the borrower must pay a funding fee which can be rolled into the loan amount. Click here to learn more about VA Home Loans.

Navy Federal Credit Union offers 100% financing to qualified members buying primary homes. Navy Federal member eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members. The loan is similar to the VA’s and includes a funding fee of 1.75%. Click here to learn more about the Navy Federal Credit Union mortgage.

USDA’s Rural Development Mortgage Guarantee Program offers a no down payment loan that comes from a bank. Instead of mortgage insurance, USDA levies a 2% upfront guarantee fee which can be rolled into the loan amount. This USDA map highlights eligible areas and other eligibility requirements.