A GUIDE TO LOW DOWN PAYMENT MORTGAGE PROGRAMS by W Troy Swezey
There’s no question about it: Buying a first home is a big
financial commitment. In most cases, a home is the largest
single purchase an individual or family will make in a lifetime.
However, because of the tax advantages afforded to homeowners,
buying a home also can be one of the best financial decisions
you’ll ever make.
Problem is, many would-be homeowners remain renters simply
because they mistakenly believe mortgage lenders require that
buyers come up with 20 percent of the purchase price as a down
payment. While it is true lenders feel it is less risky to work
with buyers who are able to bring a substantial down payment to
the table, the standard 20 percent requirement is fast becoming
a relic of the past. In recent years, lenders have become more
flexible in working with first-time homebuyers by creating a
variety of special programs that require only a small down
payment. These programs, combined with the most favorable
interest rates in two decades, have encouraged growing numbers
of renters to consider the tremendous benefits of home ownership.
While the list of programs offered by individual lenders is too
extensive to mention in detail, here are some common programs
you are likely to come across as you work with your real estate
agent to purchase your first home:
Federal Housing Administration (FHA): FHS mortgages allow
homebuyers to purchase a home with as little as a 5 percent
down payment, and to finance all non-recurring closing costs.
In addition, borrowers are allowed to use up to 41 percent
of their gross income toward paying mortgage debt – well
above the ratio allowed under most private programs.
Department of Veterans Affairs (VA): VA mortgages allow veteran
or active service personnel purchase home with no down
payment. However, there is no purchase price limitation for
buyers able to make a down payment. Like the FHA program,
VA borrowers can put up to 41 percent of gross income toward
their mortgage debt.
Mortgage Revenue Bonds and Mortgage Credit Certificates:
Mortgages funded with these instruments typically require a
minimum of 5 percent down and have interest rates that are
1.5 to 2 percentage points below conventional 30-year fixed
rates. These types of loans, offered by state and local
housing agencies, are available only to first-time homebuyers.
There generally are income and purchase price caps that vary,
depending on where you plan to buy.
Private Mortgage Insurance: Most major lenders offer privately
insured mortgages, which generally require a 10 percent down
payment (although some lenders offer loans with a 5 percent
down payment to buyers with exceptional credit). These loans
typically are not limited by maximum loan amount or purchase
price limitation.
Community Homebuyer Program: Through their networks of mortgage
lenders, the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac) offer Community Homebuyer Program loans. These programs
require a 5 percent down payment, 3 percent of which may be
a gift. To further help buyers qualify, applicants may use
38 percent of their gross income.
Clearly, there are a lot of options for first-time homebuyers.
While lenders will be more than happy to share information about
their own programs, you can save yourself a good deal of time
by first selecting a professional real estate agent who is
experienced in working with first-time buyers in the areas
where you plan to buy.
An agent who focuses on first-time buyers will know from
experience which lenders in your area offer a low down payment
program that will meet your unique needs.
Today, taking the first step toward owning your own home is
easier than before. Your real estate agent is your best
resource for finding innovative ways to help you come up with
a down payment and qualify for financing. There’s certainly no
need to wait until you’ve saved a 20 percent down payment!
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W. Troy Swezey is the author of “A GUIDE TO LOW DOWN PAYMENT
MORTGAGE PROGRAMS." As a Realtor at Century 21 Paul &
Associates, he has helped many individuals with their real
estate needs. Visit his web site to download his free e-book,
“REAL ESTATE SECRETS EXPOSED.” http://www.TroyIsMyRealtor.com
or TroyC21@usa.net
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