Tuesday, June 29, 2010
6/29/2010 04:28:00 PM | Posted by
Arbor Mortgage
With the mortgage market tightening up over the last couple of years, many people think their only down payment option for a new home is 20% or more. That couldn’t be further from the truth. Surprisingly, there are many options for low down payment loans.
Zero – That’s right, $0 – down loans
Didn’t zero down loans go away with the mortgage meltdown? No way, there are still some terrific zero down programs available.
USDA Rural Development – The United States Department of Agriculture has a Rural Development loan product that is truly zero down. USDA loans come in 2 flavors – Guaranteed and Direct. The Direct program is for low income buyers and is only available through the USDA offices. The Guaranteed program is available through mortgage lenders or brokers and is for low-moderate income families purchasing in rural/semi-rural areas. Aside from not requiring a down payment, these loans have many other advantages. There is no monthly mortgage insurance, interest rates are very low, and the areas of rural eligibility are very liberal.
Veteran’s Administration Loans (VA) – VA loans are for veteran’s, active duty military, reservists/National Guard, and some surviving spouses. This zero down loan program also doesn’t charge monthly mortgage insurance; there are less closing costs, and very low interest rates. One unique advantage right now for military members is the recent tax credit. If you were active duty for more than 90 consecutive days last year, you may have until June of 2011 to collect the home buyer tax credit.
Low Down Payments – 3-5%
Fannie Mae Homepath – Fannie Mae offers a specialized loan program for a select number of their REO homes (homes Fannie owns due to foreclosure). If the property is eligible for a Homepath loan, there are huge advantages, including no appraisal, lower credit requirements, and only a 3% down payment required.
FHA Loans – Federal Housing Administration loans require a 3.5% down payment on all loans. FHA loans allow the funds to come from multiple sources, though, including a gift from family or community grants, which can make it easier to achieve. FHA loans have many advantages, including low interest rates and easier credit qualifications.
Conventional Loans – Fannie Mae and Freddie Mac offer a conventional loan product that only requires 5% down. These loans types are much harder to meet qualifications. Not only do you have to meet the minimum requirements of Fannie or Freddie, but you need to meet any lender specific guidelines along with those of the mortgage insurance company. Mortgage insurance is required, and you must have stellar credit and cash reserves to qualify. These loans aren’t available in all areas.
10% down or more
Once you have 10% down or more, your loan options widen and there are more options without mortgage insurance. FHA even offers a 15 year fixed loan with no mortgage insurance if you put down 10% or more as a down payment. Conventional loans – generally Fannie or Freddie – lose the mortgage insurance after 20% down. After 20% down, things get much easier. Many credit restrictions are lifted and the guidelines loosen considerably.
There are also other loan options available for more unique situations. Just talk to your loan officer about all your options and keep an open mind. It’s important to always look at the whole picture. You don’t just want a loan based on down payment. You want a loan with affordable terms as well, so do your homework on all aspects of the loan.
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- Arbor Mortgage
- Arbor Mortgage is a Michigan based mortgage lender that has been providing mortgage solutions for more than a decade. Since 1998, Arbor Mortgage has helped more than 20,000 people purchase or refinance their homes. Arbor offers a variety of mortgage programs including FHA, USDA Rural Development, VA, Conventional and Alternative loans.
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