Have you served in the armed services? If so, there are all sorts of programs available to you. One such option is a VA loan. These loans don’t require any down payment if you are a qualified veteran or active duty service member. Some National Guard and U.S. Reserve members can qualify for this kind of a loan as well. With a VA loan, there is no mortgage insurance and you will pay a funding fee, although this can be rolled into the VA loan, so there really is no actual down payment at all. Additionally, VA loans typically have lower interest rates than your traditional mortgage, which makes it an extremely desirable loan. While the interest can change, it currently sits at a 2.15 percent for first time home buyers. If you are a reserve or National Guard member, the rate does go up to 2.4 percent. Either way, it makes enlisting and serving in the reserves all that more attractive, as you can save thousands of dollars over the course of your loan with the VA loan.
Yup, if you served in the armed forces you do have access to some pretty sweet no down payment mortgages. The Navy Federal Credit Union is one of them. Credit unions are typically better when it comes to loans, although these locations are also more exclusive. The credit union provides 100 percent financing when you qualify for buying a home. This loan is a bit more available than the VA loan though. It is open for members of the military, the U.S. Department of Defense, some civilian employees, and also family members of those who qualify. So, if you are the son or daughter of a veteran, you may qualify for this kind of a loan. Having a parent who served in the military not only can help them out but it is able to help you out as well. You will find many similarities between Navy Federal and the VA loan. The main difference though is the credit union has a 1.75 percent funding fee, which is less than what you would pay with the VA loan.
Alright, so you are not a military member and you either don’t qualify for the USDA loans (see below) or you didn’t find anything desirable in the set areas. Now what? Well, you can consider mortgage insurance. With this form of insurance you may be able to pay a down payment of as low as three percent. With the private mortgage insurance, you likely will find it costs substantially less than a FHA mortgage insurance. The thing about this is your private mortgage insurance does have much stricter credit needs. Due to this, your will be better off applying for this if you have a strong credit score. Not that anything is preventing you from applying regardless of your credit score, but you likely will only receive approval if you’re in strong standing. Another perk of going with the private mortgage insurance is that after you have paid off 20 percent of the home’s value, you can cancel the insurance. This means you’ll save even more money on your loan. With a traditional FHA mortgage insurance option, the only way you can adjust your insurance is if you refinance the amount into a non FHA loan.
Alright, so let’s say you didn’t serve in the military and you don’t have a family member who served. Does that mean you are completely out of luck when it comes to a low or no down payment mortgage? No, you still have some options. There is the USDA Rural Development mortgage. What kind of loan is this? The loan provides people who want to buy homes in typically rural areas are able to receive no down payment mortgages. However, it is more than just rural areas though. There are some eligible areas where you can receive a loan even if it isn’t farmland. In fact, you can check out the USDA website to see everywhere you may qualify for this no down payment mortgage. This mortgage is also designed for first time home buyers, so you can pick up the mortgage if you have never owned a home before. With this mortgage there is no mortgage insurance, although you will pay a two percent upfront fee. You can roll this into the total loan amount as you pay it back, so you won’t be forced to pay anything up front. There is also an annual guarantee fee of .5 percent of your loan balance.
As covered a bit above, the FHA allows you to land a down payment of around 3.5 percent. This is a half percentage point higher than the private mortgage insurance, but the credit restrictions are not as daunting. this means more people are able to qualify for this kind of mortgage. This way, even if you have a less than stellar credit score you might be able to land this low down payment option. When going with an FHA mortgage you will be charged an upfront premium of 1.75 percent. On top of this, there is a .85 percent annual premium placed on 30 year loans (15 year loans do not see this kind of premium).
The HomeReady Mortgage
This down payment sits right at three percent. Now, it is backed by Fannie Mae, which ran into some trouble a few years ago based on loans it handed out earlier, but in terms of a quality mortgage with a low down payment, it is difficult to find anything that is going to be better for you, especially if you don’t qualify for the other options.