Don’t be the person who sits on the sidelines of purchasing your dream home because you lack a down payment. There isn’t any reason why Buyers shouldn’t be taking advantage of the low-down payment programs that are available to them. Buyers who are not taking full advantage of these programs are running the risk of spending more money on rent, delaying the potential of home price appreciation, forego the tax advantages of deducting mortgage interest and could be missing out on historically low mortgage rates.
High rents and low interest rates should be enough to convert more people into potential home buyers, but low-down payment options can add that extra point that tips the balance.
Private Mortgage Insurance
The most common methods of low-down payment loan options are conventional loans and FHA loans with private mortgage insurance (PMI). Loans with PMI can be more attractive because it requires a borrower to put as little as 3 to 3.5 percent down. Private mortgage insurance may be an added expense to the mortgage payment, but this is the reason why homeowners qualify for a mortgage in the first place.
Private mortgage insurance started in 1957 and has served a reliable and affordable way of expanding homeownership by helping millions of families get into homes. Anytime a 20% down payment can’t be accomplished the private mortgage insurance steps in. This is insuring the lender in case the bower defaults on the loan. In the event of a default the insurance typically makes up the difference on what the lender may lose when they have to foreclose on the home.
Several Options For Low Down-Payment Mortgages
And it even gets better. There are so many mortgage programs that are available to Utah home buyers that will allow even 100% financing. Most popular 100 percent financing program is Utah Housing. Utah housing is a FHA back mortgage with down payment assistance of a second mortgage. A buyer is able to finance the 3.5 percent down payment that is a requirement of FHA into a second mortgage, thus allowing the buyer to purchase with no down payment.
Another popular low-down payment loan program is a VA. A VA loan is available to eligible American Veterans and their surviving spouse. There is no down payment required and is a 100% financing mortgage.
USDA home loan is another true 100% financing program, that is used in rural areas. Don’t let the rural areas fool you, this is usually any city or area with fewer than a population of 10,000. Here in Utah and Salt Lake areas there are places like Tooele, Saratoga Springs and Eagle Mountain that still offers USDA financing.
Gift funds are allowed and very popular has well. Most parents and even Grandparents wants to help their kids become home owners. Almost all the mortgage programs out there will allow a family member to gift funds for a down payment.
Of course, lets not forget about the several Grant programs that are out there. Almost every City and County has some form of Grants or free money to assist in buying a home. Not all Grants are for first time home buyers, some are available even if you have owned a home in the past. Some of these Grants are forgiven and some will need to be payed back.
A fantastic mortgage program that may not be 100% financing but is really close is a conventional loan from Freddie Mac that offers a 1% down program. With participating lenders, the lender will give 2% to the borrower and the borrower comes in with 1%, this makes up the required 3% down that conventional requires. This does more than just helps the buyer come in with little out of pocket, but they will come in and have instant equity in the home.
So, you can see the many options are available out there that will allow a buyer to purchase with very little money out of pocket. This will help cut the time down to save for a large 20 percent down and get the buyer into a home so they can start enjoying the pride of homeownership and get on the appreciation train that we are experiencing.
Find out what mortgage product you may qualify for or best fit your needs.