If you are a first-time homebuyer, getting a mortgage may seem overwhelming — especially with all the different options available. Maybe you don’t have a lot of money for a down payment or your credit isn’t great. The good news is, you can still qualify for a home loan. Here are 4 low or no down payment options that can help you, as a first-time homebuyer, get into the house of your dreams.
With an FHA loan, all you need is a 3.5% minimum down payment to buy your first home. Because the Federal Housing Administration backs the FHA loan, the qualifications are a bit more lenient. People who have no established credit or small savings for a down payment, and even a credit score as low as 580 can qualify. The FHA loan is also available to immigrants who have a Visa or Green Card, as well as those who have gaps in their employment.
It’s also easier to qualify for an FHA loan if you’ve filed for bankruptcy. With a conventional loan, you have to wait four years after filing Chapter 7 to apply for a mortgage. With the FHA loan, you only have to wait two years. If you filed for Chapter 13, you only have to wait one year. You can also get an FHA loan three years after being foreclosed on your previous property.
The government created the VA loan to provide home ownership to veterans and military personnel. Like the FHA loan, the government backs the VA loan for extra security, so qualifying is easier. To qualify, you must get a certificate of eligibility from the Veterans Administration. Having bad credit may not hinder you from getting approved. VA loans require no down payment or Private Mortgage Insurance (PMI). Veterans can choose either a 30-year fixed VA loan or a 15-year fixed VA loan for up to $424,100. They may also get a cash-out refinance of up to 100% of their home.
USDA Rural Development Loan
For those wishing to buy a home in a rural area, the USDA Rural Development Loan requires zero down payment, making it great for first-time home buyers. The government also backs this loan for added security, so there’s low or no PMI attached to it. You only have to pay a 1% guarantee fee upfront and 0.5% each year after that. That’s less than the 1.75% up front and 0.85% each year with the FHA loan. If you’ve recently filed for bankruptcy or were foreclosed, you won’t have to wait too long to qualify for a USDA loan.
Conventional 1% Down Mortgage
Riverbank Finance offers homebuyers a way to put only 1% down on a home and still get a conventional mortgage. In this case, the home buyer puts 1% down and the lender (Riverbank Finance) contributes 2%, giving home buyer 3% equity when closing on the home. Freddie Mac created this option to make homes more affordable for new buyers. It allows people to buy a new home for, essentially, the cost of one month’s rent and avoid PMI altogether or drop PMI in the future. Your 1% down payment may be a gift from someone, you must have at least a 700 FICO score, and your debt-to-income (DTI) ratio is limited to 43%.
For more information or to speak with a loan officer about any of these mortgage options, call Riverbank Finance at (800) 555-2098.