You CAN Buy a House with a 3% Down Payment
I hear so often in news reports and read in articles that homebuyers must have a 20% down payment in order to buy a house.
Nothing could be further from the truth.
In today’s mortgage environment, options for low (and sometimes no) down payment abound. I am going to touch on all of those options for you very briefly in this report, but I’m going to spend more time on the 3% down payment options because that is the low down payment loan program that most homebuyers will qualify for.
Zero Down Payment
There are 2 true no down payment mortgage programs that come to mind right off the bat. Those 2 programs are VA and USDA.
There are several states that offer down payment assistance in the form of small second mortgages offered to buyers that make less than a pre-determined amount of income each year and want to live in that mortgaged property for many years. The exact terms of those different housing finance authority programs differ from state to state, and I’m not going to cover those programs because there is such a hodge podge of those programs available to buyers.
VA mortgage loans are loans that are given by a mortgage lender and are guaranteed by the Department of Veteran Affairs. VA loans allow active and former military members and reservists to purchase a home with no money down, and they also allow the seller of the home to pay possibly all of the closing costs associated with getting a VA loan. In these scenarios, veterans of our military and reserves can actually purchase a home with no money at all out of pocket. VA loans are a fantastic benefit offered to our servicemen and women, and these loans should be utilized when down payment and closing costs funds are at a minimum for our military heroes.
USDA mortgage loans are loans that are guaranteed by the US Department of Agriculture. These loans are available to any buyer who meets 2 requirements.
First, the household income of the buyer must be below the median area income for the zip code that the property is located in. This information can be found on the USDA rural housing website here.
Second, the property being purchased must be located in an eligible area as determined by the USDA rural housing website…
If both the income of the buyer and the property location meet USDA restrictions, then USDA may be a great loan program for a future homebuyer.
3% Down Payment
Few homebuyers will qualify for a zero down payment program with USDA or VA.
Because of this fact and that the biggest obstacle for most homebuyers is coming up with a down payment, lenders have introduced a couple of different 3% down payment mortgage programs that fit a much wider group of consumers.
Those 3% down payment programs fall into two categories: 3% down payment with income limits and 3% down payment without income limits.
3% Down Payment Mortgage with Income Restrictions
The 3% down payment programs with income restrictions are available for first time homebuyers and repeat buyers as well. A first time homebuyer is defined as someone who has not owned a property in the past 3 years. (These programs are also available for some homeowners who want/need to refinance their current mortgage.)
If all applicants for the mortgage are first time homebuyers, then homebuyer counseling must be completed by a preferred counseling agency. A list of those preferred agencies can be found here or can be completed through Freddie Mac’s CreditSmart program here.
A borrower’s credit score generally needs to be a 640 or higher to qualify for this program, and the 3% down payment funds will be verified through your bank/credit union. However, all of the 3% down payment can come from a gift from a relative, spouse, or partner.
The income limits for the Freddie Mac 3% down payment program for the area you are buying in can be checked by going here.
**Ask a loan officer about the opportunity to be reimbursed at closing for the cost of your appraisal. This could be a savings of up to $525 for homebuyers, and is offered to you by Gagliano Mortgage, Inc.
3% Down Payment Mortgage without Income Restrictions
The 3% down payment without income restrictions is a relatively new program option available for homebuyers. At least one applicant for the mortgage should be a first time homebuyer.
A first time buyer is considered anyone who has not owned any property within the past 3 years.
Homebuyer counseling is required if all buyers are first time homebuyers. A list of those preferred agencies can be found here or can be completed through Freddie Mac’s CreditSmart program here.
The credit scores of each applicant for this program typically need to be 640 or higher.
**Ask a loan officer about the opportunity to be reimbursed at closing for the cost of your appraisal. This could be a savings of up to $525 for homebuyers, and is offered to you by Gagliano Mortgage, Inc.
Don’t Give Up Hope
If you have discovered that you do not qualify for any of the above programs due to their limitations mentioned in this report, then don’t give up hope of being a homeowner. There are still other options available to you.
Another option for homebuyers who do not meet the above loan program requirements is an FHA loan. An FHA loan is insured by the Department of Housing and Urban Development (HUD), and typically has fewer restrictions than any of the programs above.
FHA typically allows credit scores down to 580 with a 3.5% down payment.
FHA also allows the seller of the property to pay up to 6% of the sales price of the home towards the buyer’s closing costs. This generous allowance often allows buyers to come to the closing table with only their 3.5% down payment and nothing additional.
FHA also allows the entire 3.5% down payment to come from a gift from a relative, spouse, or partner of the buyer.
Summary
In summary, there are several low to no down payment options available for homebuyers today.
The mortgage experts at Gagliano Mortgage, Inc. located in Birmingham, Alabama would be happy to evaluate your goals and needs and structure a low down payment program to fit those. Our no pressure mortgage loan officers love their job, and they take pride in helping many people become homeowners.
Give Gagliano Mortgage, Inc a call today at 205-979-4412, and see if we can help make that dream come true for you!
